Question

Use the following information to answer the next three questions:

The following information is available from the records of Aggies R Us, Inc. at the end of the 2017 calendar year.  Assume this is Aggies’ 1^st year of operation.

Accounts Receivable           $102,200        Notes Payable                       $????

Cash                                        70,890              Salary Expense                   320,000

Building                                    75,000           Retained earnings ????

Advertising Expense                60,000             Accounts Payable                  62,800                                   

Dividends                                 12,200             Income Tax Expense             23,100

Service Revenues                  460,000             Common Stock                    120,000           

Office Equipment                     22,500             Wages Payable                     15,450

Determine Aggies’ Net Income for the year ended December 31, 2017:

	A.	$36,900
	B.	$80,000
	C.	$56,900
	D.	$44,700
	E.	$41,500

1 points   

QUESTION 7

Determine the balance for Aggies’ Retained Earnings on December 31, 2017:

	A.	$44,700
	B.	$29,300
	C.	$42,900
	D.	$67,800
	E.	$56,900

1 points   

QUESTION 8

Determine the balance for Aggie’s Notes Payable on December 31, 2017:

	A.	$105,890
	B.	$51,090
	C.	$43,690
	D.	$27,640
	E.	$66,490

Answer 1

• All working forms part of the answer
• Determination of Net Income:

Service Revenues	$                         4,60,000
Expenses:
Advertising Expense	$                             60,000
Salary Expense	$                         3,20,000
Income Tax Expense	$                             23,100
Total Expenses	$                         4,03,100
Net Income [460000 – 403100]	$                             56,900

Hence, the answer is Option ‘C’ $ 56,900

• Question 7: retained Earnings balance (ending)

Retained Earning Beginning Balance	$                                      -   (first year of operation)
Add: Net Income	$                             56,900
Less: Dividends	$                             12,200
Ending Retained Earning Balance	$                             44,700

Hence, the correct answer is Option ‘A’ $ 44,700

• Question 8: Notes payable balance = Total Assets – Total Liabilities & equity (excluding Notes Payable)

Assets
Cash	$                               70,890
Accounts Receivable	$                            1,02,200
Building	$                               75,000
Office Equipment	$                               22,500
Total Assets	$                            2,70,590
Liabilities & Equity
Accounts Payable	$                               62,800
Wages Payable	$                               15,450
Common Stock	$                            1,20,000
Ending Retained Earning Balance	$                               44,700
Total Liabilities & Equity (excluding Notes payable)	$                            2,42,950
Difference between Assets and Liabilities & Equity = Notes payable =	$                               27,640

Hence, the answer is Option ‘D’ $ 27,640