Received $42,500 cash from the issue of a short-term note with a 5 percent inter
ID: 2484119 • Letter: R
Question
Received $42,500 cash from the issue of a short-term note with a 5 percent interest rate and a one-year maturity. The note was made on April 1, 2014.
Received $118,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 5 percent.
Paid the sales tax due on $98,000 of the service revenue for the year. Sales tax on the balance of the revenue is not due until 2015.
Received $143,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate of 5 percent.
Paid the sales tax due on $118,000 of the service revenue. The sales tax on the balance of the revenue is not due until 2016.
Organize the transaction data in accounts under an accounting equation. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount. Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Accounts Titles for Retained Earnings".)
Prepare the income statement for 2014 and 2015. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)
Prepare the statement of changes in stockholders’ equity for 2014 and 2015. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)
Prepare the statement of cash flows for each year. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount. Amounts to be deducted should be indicated with a minus sign.)
Prepare the balance sheet for 2014 and 2015. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)
The following transactions apply to Ocktoc Co. for 2014, its first year of operations:Explanation / Answer
Answer a. Event Assets = Liabilities + Stockholder's Equity Cash = Sales Tax payable + Interest payable + Notes Payable Common Stock Retained Earnings Revenue - Expenes 2014 1 42,500 = - + - + 42,500 + - - - 2 123,900 = 5,900 + - + - + - 118,000 - - 3 (72,000) = - + - + - + - - - 72,000 4 (4,900) = (4,900) + - + - + - - - - 5 - = - + 1,594 + - + - - - 1,594 Total 89,500 = 1,000 + 1,594 + 42,500 + - 118,000 - 73,594 Total Assets = 89500 = Total Liabilities = 45094 + Total retained Earnings = 44,406 Total Liabilities & Shareholders' Equity = 89500 Op. Bal. 89,500 = 1,000 + 1,594 + 42,500 + - 44,406 - - 2015 = + + + - 1 (1,000) = (1,000) + - + - + - - - 2 150,150 = 7,150 + + + 143,000 - 3 (44,625) = + (1,594) + (42,500) + - 531 4 (85,000) = + + + - 85,000 5 (5,900) = (5,900) + + + - Total 103,125 = 1,250 (0) + - + - 187,406 - 85,531 Total Assets = 103,125 = Total Liabilities = 1250 + Total retained Earnings = 101,875 Total Liabilities & Shareholders' Equity = 103,125 Answer b. Income Statement 2014 2015 Revenue Service Charges 118,000 143,000 Less: Expenses Opearting exp. (72,000) (85,000) Interest - Notes Payable (1,594) (531) Net Income 44,406 57,469 Answer b-2 Statement of Change in Stockholders' Equity 2014 2015 Opening Balance - 44,406 Net Income 44,406 57,469 Closing Balance 44,406 101,875 Answer b-3 Cash Flow Statement For the Year Ended Dec 31, 2014 Cash flow from Operating Activities Net Income 44,406 Add/(Less) non cash effects on operating activities Increase in Sales Tax Payble 1,000 Increase in Interest Payable 1,594 2,594 Net Cash provided by operating activities 47,000 Cash flow from Investing Activities - Cash Flow from Financing Activities Borrowed from Notes Payable 42,500 Cash Flow from Financing Activities 42,500 Net Increase / (Decrease) in Cash 89,500 Cash & Cash Equivalent as on Jan. 1, 2014 - Cash & Cash Equivalent as on Dec 31, 2014 89,500 Cash Flow Statement For the Year Ended Dec 31, 2015 Cash flow from Operating Activities Net Income 57,469 Add/(Less) non cash effects on operating activities Increase in Sales Tax Payble 250 Decrease in Interest Payable (1,594) (1,344) Net Cash provided by operating activities 56,125 Cash flow from Investing Activities - Cash Flow from Financing Activities Payment of Notes Payable (42,500) Cash Flow from Financing Activities (42,500) Net Increase / (Decrease) in Cash 13,625 Cash & Cash Equivalent as on Jan. 1, 2014 89,500 Cash & Cash Equivalent as on Dec 31, 2014 103,125
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