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X Company is a merchandiser and prepares monthly financial statements. The follo

ID: 2598007 • Letter: X

Question

X Company is a merchandiser and prepares monthly financial statements. The following is its balance sheet at the beginning of January:

The following summary transactions occurred during January:

Sold stock to investors for $40,000.

Borrowed $22,000 from a bank.

Bought merchandise from suppliers, paying $3,520 and promising to pay $4,530 next month.

Bought equipment from a manufacturer, paying $39,200 and promising to pay $4,700 in three months.

Paid $3,326 to merchandise suppliers that it had promised to pay.

Sold merchandise, receiving $16,327 cash and promises to pay of $4,503; the merchandise that was sold previously cost $10,415.

Paid a total of $518 for rent and insurance in advance.

Received $2,901 from customers who had promised to pay.

Paid $5,330 for wages, utilties, and other miscellaneous expenses.

Note: Ignore adjusting entries.
4. What was the cash balance on January 31?


5. What were total equities on January 31?

6. What was net income in January?

                                                     Balance Sheet                                                         January 1

Explanation / Answer

Cash Balance on January 31 Cash Balance on 1st January $50,201 Add:             Sold of stock to investors $40,000             Borrowed From Bank $22,000             Sold of mechandise $16,327             Received from customers $2,901 Total $131,429 Less:             Bought Merchandise from suppliers $3,520             Bought Equipment $39,200           Paid Merchandise Suppliers $3,326           Paid rent & Insurance in advance $518           Paid wages utilties & other Misc Exp $5,330 Total $51,894 Cash Balance on January 31   ( 131429-62309) $79,535 Total Equities on January 31 Equites on January 1st $378,966 Add             Sold Stoct to Investors $40,000             Borrowed From Bank    $22,000           Net income in January $5,085             Accounts Payable                         Bought Merchandies & Promise to Pay(4530-3326) $1,204                         Bought Equipment & Promise to pay $4,700 Total Equites on January 31st $451,955 Net Income in January Sale of Merchandies ( $16327+$4503) $20,830 Less : Cost of sold of merchandies $10,415              Paid for wages & Utilities & Misc Exp $5,330 Net Income in January $5,085