X Company is a merchandiser and prepares monthly financial statements. The follo
ID: 2598302 • 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 $50,000.
Borrowed $30,000 from a bank.
Bought merchandise from suppliers, paying $3,715 and promising to pay $4,302 next month.
Bought equipment from a manufacturer, paying $31,200 and promising to pay $4,200 in three months.
Paid $2,843 to merchandise suppliers that it had promised to pay.
Sold merchandise, receiving $17,837 cash and promises to pay of $4,513; the merchandise that was sold previously cost $11,175.
Paid a total of $512 for rent and insurance in advance.
Received $2,712 from customers who had promised to pay.
Paid $5,260 for wages, utilties, and other miscellaneous expenses.
Note: Ignore adjusting entries.
4. What was the cash balance on January 31? $109,295
5. What were total equities on January 31?
341350 Was incorrect for this problem
6. What was net income in January?
5649 was incorrect for this problem
Balance Sheet January 1Explanation / Answer
4 Cash balance as on Jan 31. Beginning balance 52276 Add:Receipts Sold stock to investors 50000 Borrowed from a bank. 30000 Sold merchandise 17837 Received from customers 2712 100549 152825 Less:Payments Payment to suppliers 3715 Purchase of equipment 31200 Payment to suppliers 2843 rent and insurance 512 wages, utilties, and other miscellaneous expenses 5260 43530 109295 5 Total equities as on Jan.31 Beginning balance: Paid-In Capital 216464 Retained earnings 69237 285701 Add: Sold stock to investors 50000 Net income (Refer part 6) 5915 55915 Total equities as on Jan.31 341616 6 Computation of net income: Sale of merchandise (17837+4513) 22350 Less:Cost of merchandise sold 11175 Gross profit 11175 Less:Operating expenses Wages,utilities & miscellaneous expense 5260 Net income 5915 Other transactions has no effect on net income
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