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    Balance Sheet for Pope's Garage

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    Pope's Garage had the following accounts and amounts in its financial statements on December 31, 2010. Assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred 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 available....................................................................................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, 2010.
    b. Calculate the total liabilities and owners' equity at December 31, 2010
    c. Calculate the earnings from operations (operating income) for the year ended December 31, 2010.
    d. Calculate the net income ( or loss) for the year ended December 31, 2010
    e. What was the average income tax rate for Pope's Garage for 2010?
    f. If $16,000 of dividends had been declared and paid during the year, what was the January 1, 2010, balance of retained earnings?

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    Solution Summary

    The solution gives detailed steps on computing total assets, total liabilities, earnings, net income and tax rate for given balance sheet.

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