On January 1, 2011 a businessman had cash assets of $200,000 as capital. $60,000

Question

On January 1, 2011 a businessman had cash assets of $200,000 as capital. $60,000 worth of raw materials in his firm. He owed $100,000 in accounts payable and had $10,000 in accounts receivable. Show the balance sheet (assets, liabilities and owner's equities) on 1/1/2011. During 2011 He purchased equipment for a total cost of $45,000 by paying from his cash capital. He purchased office supplies on accounts payable for $1,000. He used up $50,000 worth of raw materials. He paid $50,000 in salaries to his employees to produce finished products from the raw materials. These finished products were sold for $350,000 He paid $10,000 for utilities He also paid back $30,000 toward his accounts payable. Show his new balance sheet at the end of the year. i.e. on 12/31/2011. What is the net income for the year (2011)

Explanation / Answer

Answer:

(a)

(b)

(c)

BALANCE SHEET JANUARY 1ST, 2011 Amount $ Assets: Current Assets Cash                        200,000 Accounts receivable                           10,000 Inventories - Raw Materials                           60,000 Total Current Assets        270,000 Total Assets        270,000 Liabilities: Current Liabilities Accounts payable                        100,000 Total Current Liabilities        100,000 Owner's equity        170,000 Total Liabilities        270,000

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