Question

As a team, you are required to create the 4 basic financial statements for ZZZ Widget Company. Go through details described below, and create an Excel spreadsheet that shows an income statement, balance sheet, statement of owners equity, and statement of retained earnings.

Grading is based on accuracy as well as the style of the Excel sheet. I expect for you to use formulas and references as needed.

ZZZ Widget Company was formed Dec 1, 2020 with a $200,000 owner investment.

Took a 50,000 loan on 6/31 (12% annual interest rate)

Distributed $10,000 in dividends in December.

Purchased $100,000 of inventory in August (cash).

In September, sold half of inventory for $200,000 cash.

Purchased $50,000 building in January, 2020. Lifetime of 10 years.

Paid $50,000 R&D in May

The company pays 21% in corporate taxes.

Answer 1

Income statement for the Financial year ended Dec 2020
Expenditure	Amount ($)	Income	Amount ($)
To Gross Loss	20000			W.No-4
To Depreciation	5000
To Interst on Loan	3000
		By Net Loss	28000
	28000		28000

Balance sheet as at 31 st Dec 2020
Liablities	Amount ($)	Assets	Amount ($)
Owners Equity	182000	see W.No-5	Building-               $50000
			Less Depriciation ($5000)	45000	See W.NO-1
Loan $ 50000			R& D	50000
Add Interst $3000	53000	see W.No-3
			Inventory	20000	See W.No-2
Divended Payable	10000
			Cash & Bank Balance	130000	see cash & Bank a/c
	245000			245000

Statement of owners Equity
Particulars	Amount($)
Opening balance as on 1st jan 2020	$ 200000
(Please refer Note)
Add Investments during the year	$2000
Add Net profit /Loss	($20000)
Closing Balance as on 31 st Dec 2020	$182000

Statement of retained Earningsfor the year ended 31st Dec 2020
Particulars	Amount ($)
Opening Retained earning as on 1 st jan 2020
Add: Net Profit/Loss	($20000)
Less : Declared dividend	10000
Closing Retained Earning as on 31 st Dec 2020	($30000)

Note :1. In the given probleam mentioned widget company formed Dec 1 2020 I think there is typo mistake instead of Dec 1 2019
Company is formed with owner investment so owners equity as on 1 st jan 2020-$200000 (assuming that cash/ bank)
2. Company has incurred loss so no need to pay taxes

Cash & Bank a/c
Particulars	Amount($)	Particulars	Amount($)
To Building	50000	By Opening Balance	200000	Refer Note 1
To R&D	50000	By Inventory	20000
To purchases	100000	By Loan	50000
		By Inventory	60000	W.NO-2
		By tax
To Closing Balance	130000
	330000		330000

Working Note-1
Building Cost	$ 50000
Life time	10 years
Depreciation = Building cost/ Life time
Depreciation=	$5000
Working Note-2
Inventory
Opening Balance	0
Add Purchases in aug	$100000
Less Sale of inventory in sep	$20000
Less Closing Balance in sep	$20000
Sale of Inventory in Aug	$60000
Working Note-3
Loan taken on 31st june 2020	$50000
Rate of Interst	12%
Interst on loan for 6 months	$50000*12%*6/12
Interst on Loan	$3000
Working Note-4
Sales in the month of sep	$20000
Sales in the month of aug	$60000
	$80000
Purchases in the month of aug	$100000
Gross Loss	($20000)
Working Note-4
Total assets = Total Liablities
Total assets-	$245000
As per above formula total liablities-	$245000
As ber balnce sheet all liablities total Except Owners Equity	$63000
So balnce should be owners equity	$182000