Question

Use the following information to answer the next six questions:

All balances are as of 12/31/2017 unless specified otherwise.

Loss on the Sale of Equipment	62,250	Income Tax Expense	48,750
Short Term Investments	1,500	Inventory	97,500
Retained Earnings, 1/1/17	281,000	Gain on Sale of Equipment	27,500
Goodwill	50,000	Cost of Goods Sold	204,000
Common Stock	???	Notes Payable 5/1/18	12,500
Cash	70,000	Sales Revenue	447,500
Accumulated Depreciation	50,000	Dividends	10,000
Notes Payable, due 12/31/19	104,500	Prepaid Expenses	2,500
Furniture	83,000	Accrued Expenses	28,000
Equipment	372,500	Accounts Receivable	42,000
Operating Expenses	43,000	Accounts Payable	36,000

Determine the Working Capital as of December 31, 2017.

	A.	137,000
	B.	5.9305
	C.	187,500
	D.	149,500
	E.	cannot be determined since the balance of Common Stock is not given.

1 points   

QUESTION 6

Determine Retained Earnings and Cash as of 12/31/2017.

	A.	Retained Earnings          Cash $398,000                                $70,000
	B.	Retained Earnings                    Cash $281,000                               $80,000
	C.	Retained Earnings                    Cash $422,750                               $517,500
	D.	Retained Earnings                Cash $388,000 $70,000
	E.	Retained Earnings                Cash $436,750 $80,000

1 points   

QUESTION 7

Determine Total Liabilities as of 12/31/2017.

	A.	$48,500
	B.	$76,500
	C.	$153,000
	D.	$168,500
	E.	$181,000

1 points   

QUESTION 8

Determine Income from Operations for 2017.

	A.	$200,500
	B.	$243,500
	C.	$117,000
	D.	$151,750
	E.	$165,750

1 points   

QUESTION 9

Determine the Total Assets as of 12/31/2017.

	A.	$719,000
	B.	$769,000
	C.	$679,000
	D.	$669,000
	E.	$696,500

1 points   

QUESTION 10

Determine the Profit Margin for the year ended December 31, 2017.

	A.	26%
	B.	37%
	C.	54%
	D.	382%
	E.	$243,500

Answer 1

Q5.

Working capital = Total current assets – Total current liabilities

                           = (Cash + Inventory + Accounts receivable + Short-term investment + Prepaid expenses) – (Accounts payable + Accrued expenses + Notes as 5/1/18)

                           = (70,000 + 97,500 + 42,000 + 1,500 + 2,500) – (36,000 + 28,000 + 12,500)

                           = 213,500 – 76,500

                           = 137,000

Answer: A

Q6.

Retained earnings = Beginning + Net income – Dividends

                             = 281,000 + [Sales – Cost of goods sold + Gain on sale – Loss on sale – Operating expenses – Income tax] – 10,000

                             = 281,000 + [447,500 – 204,000 + 27,500 – 62,250 – 43,000 – 48,750] – 10,000

                            = 281,000 + 117,000 – 10,000

                            = $388,000

Cash is already given as $70,000

Answer: D

Q7.

Total liabilities = Current liabilities + Long-term liabilities

                        = $76,500 + (Notes 12/31/19); [Current liability is calculated in the above working capital section]

                        = 76,500 + 104,500

                        = $181,000

Answer: E

Q8.

Income from operation = Sales – Cost of goods sold – Operating expenses

                                    = 447,500 – 204,000 – 43,000

                                    = $200,500

Answer: A