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Accounting

1. Prepare an income statement, balance sheet, and statement of changes in owners' equity; analyze results. The following information was obtained from the records of Shae, Inc.:

Merchandise inventory................................................ $132,000
Notes payable (long term)........................................... 150,000
Sales......................................................................... 450,000
Buildings and equipment.............................................. 252,000
Selling, general, and adminstrative expenses.................. 36,000
Accounts receivable...................................................... 60,000
Common stock (21,000 shares)...................................... 105,000
Income tax expense...................................................... 42,000
Cash............................................................................ 96,000
Retained earnings, 1/107............................................... 64,500
Accured liabilities.......................................................... 9,000
Cost of goods sold........................................................ 270,000
Accumulated depreciation.............................................. 108,000
Interest expense.......................................................... 24,000
Accounts payable.......................................................... 45,000
Dividends declared and paid during 2007........................ 19,500

2. Understanding and analyzing financial statement relationships-sales/service organization. Pope's Garage had the following accounts and amounts in its financial statements on December 31, 2007. Assume that all balance sheet items reflect account balances at December 31, 2007, and that all income statement items reflect activities that occured during the year then ended.

Accounts receivable............................................ $33,000
Depreciation expense.......................................... 12,000
Land.................................................................. 27,000
Cost of goods sold.............................................. 90,000
Retained earnings............................................... 59,000
Cash.................................................................. 9,000
Equipment.......................................................... 71,000
Supplies............................................................. 6,000
Accounts payable................................................ 23,000
Service revenue.................................................. 20,000
Interest expense................................................. 4,000
Common Stock................................................... 10,000
Income tax expense............................................ 12,000
Accumulated depreciation..................................... 45,000
Long-term debt.................................................... 40,000
Supplies expense................................................. 14,000
Merchandise inventory.......................................... 31,000
Sales revenue...................................................... 140,000

a. Calculate the total current assets at December 31, 2007.
b. Calculate the total liabilities and owners' equity at December 31, 2007.
c. Calculate the earnings from operations (operating income) for the year ended
December 31, 2007.
d. Calculate the net income (or loss) for the year ended December 31, 2007.
e. What was the average income tax rate for Pope's Garage for 2007.
f. If $16,000 of dividends had been declared and paid during the year, what was
the January 1, 2007, balance of retained earnings?

Prepare an income statement, balance sheet, and statement of changes in owner's equity; analyze results. The following information was obtained from the records of Breanna, Inc.:

Accounts receivable............................................................ $10,000
Accumulated deprecation..................................................... 52,000
Cost of goods sold.............................................................. 128,000
Income tax expense............................................................ 8,000
Cash.................................................................................. 65.000
Sales................................................................................. 200,000
Equipment.......................................................................... 120,000
Selling, general, and administrative expenses........................ 34,000
Common stock (9,000 shares).............................................. 90,000
Accounts payable................................................................. 15,000
Retained earnings 1/1/07...................................................... 23,000
Interest expense.................................................................. 6,000
Merchandise inventory.......................................................... 37,000
Long-term debt..................................................................... 40,000
Dividends declared and paid during 2007................................. 12.000

Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2007, and that all income statement items reflect activities that occured during the year ended December 31, 2007. There were no changes in paid-in captial during the year.

a. Prepare an income statement and statement of changes in owners' equity for the
year ended December 31, 2007, and a balance sheet at December 31, 2007, for
Breanna Inc.
Based on the fininacial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.
b. What is the company's average income tax rate?
c. What interest rate is charged on long-term debt?
d. What is the par value per share of common stock?
e. What is the company's dividend policy (i.e., what proportion of the company's

3. Complete the balance sheet. A partially completed balance sheet for Blue Co., Inc., as of January 31, 2008, follows. Where amounts are shown for various items, the amounts are correct.

Assets Liabilities and Owners' Equity

Cash.............................$700 Note Payable................. $______
Accounts receivable........____ Accounts Payable........... 3,400
Land............................. ____ Total liabilities............ $_____
Automoble...................._____ Owners' equity
Less: Accumulated..... _____ Common Stock............ $8,000
Depreciation.........._____ Retained earnings........ _____
Total assets.................$_____ Total owners' equity....... $_____
earnings are used for dividends)? Total liabilities+ owners' equity.. $____

Using the following data, complete the balance sheet.
a. Blue Co.'s records show that current and former customers owe the firm a total
of $4,000; $600 of this amount has been due for more than a year fom two
customers who are now bankrupt.
b. The automoble, which is still being used in the business, cost $18,000 new; a
used car dealer's blue book shows that it is now worth $10,000. Management
estimates that the car has been used for one-third of its total potential use.
c. The land cost Blue Co. $11,000; it was recently assessed for real estate tax
purposes at a value of $15,000.
d. Blue Co.'s president isn't sure of the amount of the note payable, but he does know that he signed a note.
e. Since the date Blue Co. was formed, net income has totaled $33,000, and dividneds to stockholders have totaled $19,500.

Solution Summary

The solution has various problems requiring the preparation of income statement and balance sheet.

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