Problem 1-5A Income Statement, Statement of Retained Earnings, and Balance Sheet
ID: 2562818 • Letter: P
Question
Problem 1-5A Income Statement, Statement of Retained Earnings, and Balance Sheet The following list, in alphabetical order, shows the various items that regularly appear on the fi nancial statements of Sterns Audio Book Rental Corp. The amounts shown for balance sheet items are balances as of December 31, 2017 (with the exception of retained carnings, which is the balance on January 1,2017), and the amounts shown for income statement items are balan- ces for the year ended December 31, 2017. LOSExplanation / Answer
Part 1:
Particulars
Amounts in $
Rental revenue
1,25,900.00
Less: expenses:
Rent expense
60,000.00
Advertising expense
14,500.00
Salaries and wages expense
17,900.00
Water, gas and electricity
3,600.00
96,000.00
Net income
29,900.00
Part 2:
Particulars
Amounts in $
Assets:
Accounts receivables
4,500.00
Cash
2,490.00
Total current assets
6,990.00
Display fixtures
45,000.00
Total Assets
51,990.00
Liabilities and equity:
Accounts payable
300.00
Notes payable
10,000.00
Current liabilities
10,300.00
Shareholders equity:
Capital stock
67,900.00
Total liabilities and shareholders equity
78,200.00
Part 3:
Particulars
Amounts in $
Amounts in $
Opening capital stock
50,000.00
Add: net income
29,900.00
Less: dividend paid
12,000.00
17,900.00
Closing capital stock
67,900.00
Part 4:
Yes, since the company has earned a profit during the year, hence, it is advisable to invest in the stated company.
Part 1:
Particulars
Amounts in $
Rental revenue
1,25,900.00
Less: expenses:
Rent expense
60,000.00
Advertising expense
14,500.00
Salaries and wages expense
17,900.00
Water, gas and electricity
3,600.00
96,000.00
Net income
29,900.00
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