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Salvage Value Paid in Cash

Baba Company established on January 1st 2005 with 500 common shares at $1,000.00 per share. The company received full amount of capital in cash from stockholders and deposited to bank at same day. The followings are the business transactions during the year 2005.

1. Rent a warehouse with office at $1,000.00 per month starting 1/1/2005 with $1,500.00 security deposit, refundable when contract is terminated. Rent dues on 5th every month.

2. Office furniture rental at $500.00 per month starting 1/1/2005, due on 5th the month.

3. Bought one truck for $24,000.00 on 1/1/2005 & paid in cash, expect 5 years useful life with a salvage value of $2,400.00 (Use straight-line depreciation).

4. Hired two employees at $15,000.00 and $20,000.00 annual salary, payroll date is 15th of every month.

5. 1/10/2005 cash purchased goods for 150,000.00.

6. 12/10 purchased goods for $55,000.00 at net-30day terms.

7. 12/25 purchased goods for another $45,000.00, paid cash.

8. Total sales revenue of year 2005 is $230,000.00, received cash for $220,000.00, $10,000 receivable.

9. The electricity bills for year are 200.00/Jan, 235.00/Feb, 240.00/March, 228.00/April, 210.00/May, 255/June, 272.00/July, 280.00/August, 214.00/Sept, 226.00/October, 248.00/Nov, 252.00/Dec., payment due date is 10th of the follow month.

10. Total gas for truck for whole year 2005 is $1,200.00.

11. The inventory value on 12/31/2005 is $75,000.00

Please make a Balance Sheet and Income Statement for the year ending in 2005.

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Solution Summary

The salvage value paid in cash is examined.