Question

Several accounts and amounts from the financial statements of a recently opened Blue Rifle Coffee appear below for the year ending December 31, Year 1.

Equipment 43,600

Cash 10,600

Dividends 12,000
Common stock 50,000
Retained earnings 37,000

Accumulated depreciation 17,000

Note payable, due 12-31-Yr 5 $30,000

Other operating expenses 6500

Sales revenue 120,000
Cost of goods sold 48,000

Buildings 57,500

Salaries expense 11,300

Inventory 7,200

Accounts receivable 3,900

Accounts payable 5800

Use the information provided to determine the answers to the following questions:

1. What is the total amount owed to Blue Rifle Coffee by its customers at the end of the year?

2. How much are total current assets?

3. How much does Blue Rifle Coffee owe to its short-term creditors at December 31, Year 1?

4. How much of Blue Rifle Coffee’s profit did it distribute to shareholders during Year 1?

5. Prepare an income statement for Year 1 for Blue Rifle Coffee.

Answer 1

Requirement 1:

Amount owed to company from customers i.e. Accounts receivable

$        3,900

Requirement 2:

Total current assets:
Cash	$      10,600
Accounts receivable	$         3,900
Inventory	$         7,200
Total	$      21,700

Requirement 3:

Amount owed to short term creditors i.e. Accounts payable

$        5,800

Requirement 4:

Profit distributed during Year 1 i.e. Dividends

$      12,000

Requirement 5:

Blue Rifle Coffee
Income statement
For the Year Ended December 31, year 1
Revenue
Sales		$ 120,000
Total Revenue (A)		$ 120,000
Expenses:
Cost of Goods Sold	$      48,000
Salaries expense	$      11,300
Other operating expense	$         6,500
Total Expense (B)		$   65,800
Net Income (A-B)		$   54,200