Question

In: Accounting

You have been approached by Mrs. Laney Smith, who would like you to help her organize her financial information into financial statements in preparation for filing income taxes.

 

You have been approached by Mrs. Laney Smith, who would like you to help her organize her financial information into financial statements in preparation for filing income taxes. Mrs. Smith has an Angora goat operation that runs approximately 350 does who have kids yearly. She sells the kids to other breeders and the fleece/wool from her goats to an out-of-state fiber mill.

She needs to put together Balance Sheets and Income Sheets for the last two yearends - (2017 and 2018).

1. Use the following information to create 1) a Balance Sheet for yearends 2017 and 2018 and 2) an Income Statement for 2018:

  • Mrs. Smith only recognizes depreciation on her truck and trailer used to haul animals. She purchased the truck new for $50,000 on January 11, 2017 and the trailer was purchased for $10,000 in March of 2017. The estimated salvage value of the truck is $4,500 and a 7 year useful life; and the salvage value of the trailer is $2,000 after 10 years.

  • When she purchased her truck and trailer, she only put $8,000 as a down payment on both. She financed the remaining portion with equal annual principle payments over 6 years. In addition to her annual principle payments, she makes annual interest payments of 10% of the balance on the loan.

Solutions

Expert Solution

  2017 2018
Balance Sheet        
  Assets Assets
Truck $50000   50000  
Accumulated depreciation-Truck 6500 43500 13000 37000
Trailer 10000   10000  
Accumulated depreciation-Trailer 667 9333 1467 8533
      (667+800)  
Liabilities        
Loan payable   45261   37847
         
         
Income statement        
for the year ended 2018        
Depreciation expenses (6500+800) 7300      
Interest expenses 4526      
         
         
working        
Depreciatione expenses        
Truck        
(50000-4500)/7 6500      
trailer 800      
(10000-2000)/10        
for 2017 800*10/12 666.6666667      
         
working        
Calculation of equal installments        
Loan payable (50000+10000-8000) 52000      
We need to find equal installments        
52000/PVIFA(10%,6)        
52000/4.3553 11939      
         
Year Installment I Interest T=E*10% Principle I-T ending bal E
0       52000
1 11939 5200 6739 45261
2 11939 4526 7413 37847
3 11939 3785 8155 29692
4 11939 2969 8970 20722
5 11939 2072 9867 10855
6 11939 1085 10854 1
         
         
         

ekkarill92 answered 1 year ago
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