Question

Use the following information to prepare a multi-step income statement and a balance sheet for Sherman Equipment Co. for Year 2. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) (Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

Salaries Expense	$	75,000			Operating Expenses	$	68,000
Common Stock		100,000			Cash Flow from Investing Activities		84,400
Notes Receivable (short term)		30,000			Prepaid Rent		13,100
Allowance for Doubtful Accounts		8,400			Land		46,000
Uncollectible Accounts Expense		8,700			Cash		48,700
Supplies		1,800			Inventory		98,900
Interest Revenue		6,000			Accounts Payable		52,000
Sales Revenue		344,000			Salaries Payable		18,000
Dividends		4,100			Cost of Goods Sold		154,000
Interest Receivable (short term)		2,100			Accounts Receivable		62,000
Beginning Retained Earnings		84,000

  

Answer 1

1. Sherman Equipment Co. Income Satement For the Year Ending December 31

Sales Revenue		$344,000
Cost of Goods Sold		$(154,000)
Gross Margin		$190,000
Operating Expense ;
Salaries Expenses	$75,000
Operating Expense	$68,000
Uncollectable Account Expense	$8,700	$151,700
Operating Income		$38,300
Non- Operating Items;
Interest Revenue		$6,000
Net Income		$44,300

2. Sherman Equipment Co. Balancesheet   

Assets
Cash		$48,700
Accounts Receivable	$62,000
Less: Allowance for doubtful accounts	$(8,400)	$53,600
Inventory		$98,900
Interest Receivable		$2,100
Prepaid Rent		$13,100
Supplies		$1,800
Note Receivable		$30,000
Land		$46,000
Total Asset			$294,200
Liabilities and Stockholders Equity
Current Liabilities;
Accounts Payable		$52,000
Salaries Payable		$18,000
Total Liabilities			$70,000
Stockholders Equity
Common Stock		$100,000
Retained Earnings		$124,200
Total Stockholders Equity			$224,200
Total Liabilities and Stockholders Equity			$294,200

Retained Earnings

= $84,000 + $44,300-$4,100 = $ 124,200