Question

Deedle company began the year with the following account balances:

Cash	$15,000
Accounts receivable	$42,000
Inventory	$33,000
Accounts payable	$24,000
Paid-in capital	$45,000
Retained earnings	$21,000

During the year, Deedle had the following transactions:

a. Borrowed $30,000 on a long-term loan

b. Interest expense for the year was $3,000. This amount has not yet been paid in cash

c. Sales for the year were $500,000, all on account

d. Cash collections of accounts receivable, $280,000

e. Purchased inventory on account, $380,000

f. Cost of inventory sold was $350,000

g. Paid accounts payable, $173,000

h. Paid wage expense, $137,000

Q) Prepare an income statement for the year and a balance sheet (next page) as of the end of the year.

Answer 1

Requirement:1

Deedle Company
Income statement
For the Year Ended
Revenue
Sales		$       500,000
Total Revenue (A)		$       500,000
Expenses:
Cost of Goods Sold	$               350,000
Interest Expense	$                    3,000
Wage Expense	$               137,000
Total Expense (B)		$       490,000
Net Income (A-B)		$         10,000

Requirement:2

Deedle Company
Balance sheet
For the Year Ended
Assets	Liabilities
Current assets:		Current liabilities:
Cash	$        15,000	Account Payable	$          231,000
Accounts Receivable	$     262,000	Interest Payable	$               3,000
Inventory	$        63,000
Total current assets	$     340,000	Total current liabilties	$          234,000
		Long term liabilities
		Long term Loan	$            30,000
		Total long term Liabilties	$            30,000
		Stockholders` Equity
		Common Stock	$            45,000
		Retained Earnings	$            31,000
		Total stockholders` equity	$            76,000
Total Assets	$     340,000	Total liabilties and stockholders` equity	$          340,000

Working:

Deedle Company
Retained Earnings Statement
For the Year Ended
Beginning Balance	$              21,000
Add:Net Income	$              10,000
Less:
Dividends (Cash Dividend)	$                        -
Dividends (Stock Dividend)	$                        -
Retained Earnings Closing Balance	$              31,000