Question

Required
Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Co. for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)

Salaries expense	$	122,000		Beginning retained earnings	$	61,100
Common stock		110,000		Warranties payable (short term)		6,500
Notes receivable (short term)		32,500		Gain on sale of equipment		19,000
Allowance for doubtful accounts		19,000		Operating expenses		65,000
Accumulated depreciation		66,000		Cash flow from investing activities		116,000
Notes payable (long term)		160,000		Prepaid rent		38,000
Salvage value of building		21,000		Land		95,000
Interest payable (short term)		6,000		Cash		41,000
Uncollectible accounts expense		45,000		Inventory		101,000
Supplies		6,500		Accounts payable		55,000
Equipment		243,000		Interest expense		36,000
Interest revenue		6,200		Salaries payable		68,000
Sales revenue		940,000		Unearned revenue		47,000
Dividends		20,000		Cost of goods sold		595,000
Warranty expense		9,200		Accounts receivable		108,000
Interest receivable (short term)		3,600		Depreciation expense		3,000

Answer 1

ELLER Equipment Co.
Income Statement
Sales revenue		$ 940,000
Cost of goods sold		$ 595,000
Gross profit		$ 345,000
Operating expense:
Salaries expense	$ 122,000
Uncollectible accounts expense	$ 45,000
Warranty expense	$ 9,200
Operating expenses	$ 65,000
Depreciation expense	$ 3,000
Total operating expense		$ 244,200
Operating income		$ 100,800
Non-operating income or (expenses)
Interest revenue	$ 6,200
Interest expense	($ 36,000)
Gain on sale of equipment	$ 19,000
Total non-operating income (loss)		($ 10,800)
Net Income		$ 90,000

Statement of retained earnings
Beginning retained earnings	$ 61,100
Add: Net Income	$ 90,000
Less: Dividends	$ 20,000
Ending retained earnings	$ 131,100

ELLER Equipement Co.
Classified Balance Sheet
Assets			Liabilities
Current Assets:			Current liabilities:
Cash	$ 41,000		Interest payable (short term)	$ 6,000
Accounts receivable	$ 108,000		Accounts payable	$ 55,000
(less): Allowance for doubtful accounts	($ 19,000)		Salaries payable	$ 68,000
Notes receivable (short term)	$ 32,500		Unearned revenue	$ 47,000
Supplies	$ 6,500		Warranties payable (short term)	$ 6,500
Interest receivable (short term)	$ 3,600		Total current liabilities		$ 182,500
Prepaid rent	$ 38,000		Long-term liabilities:
Inventory	$ 101,000		Notes payable (long term)	$ 160,000
Total current assets		$ 311,600	Total long-term liabilities		$ 160,000
Property, plant and equipment:			Total liabilities		$ 342,500
Land	$ 95,000		Stockholders' equity
Less: Accumulated depreciation	($ 66,000)		Stockholders' equity:
Equipment	$ 243,000		Common stock	$ 110,000
Total property, plant and equipment		$ 272,000	Retained earnings	$ 131,100
			Total stockholders' equity		$ 241,100
Total assets		$ 583,600	Total liabilities and stockholders' equity		$ 583,600