Question
In: Accounting
The assets and liabilities of Hercules Inc. as of December 31,2019, and revenues and expenses for...
The assets and liabilities of Hercules Inc. as of December 31,2019, and revenues and expenses for the year ended on that date follow: Land $98,000 Property tax expense $5,000 Note payable (due 2025) 95,000 Accounts receivable 25,000 Accounts payable 21,000 Advertising expense 10,000 Rent expense 3,000 Building 140,000 Cash 10,000 Salary expense 85,000 Common shares 75,000 Salary payable 12,000 Furniture 20,000 Service revenue 200,000 Interest expense 4,000 Supplies 3,000 Beginning retained earnings were $50,000, and dividends totalled $50,000 for the year.
1. Prepare in good form a statement of earnings (income statement) of Hercules Inc. for the year ended December 31, 2019.
2. Prepare in good form a statement of retained earnings of Hercules Inc. for the year ended December 31, 2019.
3. Calculate the following for Hercules at December 31, 2019 -
: Current Assets :____________________________________________________________ Total Assets:________________________________________________________________ Total Liabilities::_____________________________________________________________ Total Shareholders’ equity:___________________________________________________ 4. Analyze Hercules Inc. by answering these questions
a. Was Hercules Inc. profitable during 2019? By how much?
b. Who owns more of Hercules Inc.’s assets, the creditors or the shareholders? Why?
Solutions
Expert Solution
Requirement 1:
| Hercules Inc. | ||
| Income statement | ||
| For the Year Ended December 31, 2019 | ||
| Revenue | ||
| Service revenue | $ 200,000 | |
| Total Revenue (A) | $ 200,000 | |
| Expenses: | ||
| Rent expense | $ 3,000 | |
| Interest expense | $ 4,000 | |
| Property tax expense | $ 5,000 | |
| Advertising expense | $ 10,000 | |
| Salary expense | $ 85,000 | |
| Total Expense (B) | $ 107,000 | |
| Net Income (A-B) | $ 93,000 | |
Requirement 2:
| Hercules Inc. | |
| Retained Earnings Statement | |
| For the Year Ended December 31, 2019 | |
| Beginning Balance | $ 50,000 |
| Add :Net Income/(loss) | $ 93,000 |
| Less: | |
| Dividends | $ (50,000) |
| Retained Earnings Closing Balance | $ 93,000 |
Requirement 3:
| Current assets | $ 38,000 | 10000+25000+3000 |
| Total assets | $ 296,000 | 38000+98000+20000+140000 |
| Total liabilities | $ 128,000 | 95000+21000+12000 |
| Total shareholders' equity | $ 168,000 | 75000+93000 |
Requirement 4:
a. Yes , Hercules. Inc was profitable and the the profit is $ 93,000
b. Most of the Hercules Inc 's assets are owned by the creditors, Because most of assets consists of assets which are bought on account .
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