Henry Josstick has just started his first accounting course and has prepared the

Question

Henry Josstick has just started his first accounting course and has prepared the following balance sheet and income statement for Omega Corp. Unfortunately, although the data for the individual items are correct, he is very confused as to whether an item should go in the balance sheet or income statement and whether it is an asset or liability.

Prepare the balance sheet and income statement by rearranging the above items. (Be sure to list the assets and liabilities in order of their liquidity. Enter all amounts as positive values.)

BALANCE SHEET Payables $ 55 Inventories $ 70 Less accumulated depreciation 140 Receivables 135 Total current assets Total current liabilities Long-term debt $ 450 Interest expense $ 45 Property, plant, and equipment 620 Total liabilities Net fixed assets Shareholders’ equity $ 170 Total assets Total liabilities and shareholders’ equity

Explanation / Answer

Omega Corp.

Income Statement for the year ended -------

Omega Corp.

Balance sheet as on ------------

$ Net Sales             900.00 Less: Cost of goods sold             680.00 Gross profit             220.00 Less: Selling, General and Administrartive expenses               58.00 Depreciation               32.00 EBIT             130.00 Less: Interest               45.00 Income Before Income Tax (EBT)               85.00 Less: Income Tax               35.00 Net Income               50.00 Less: Dividend                      -   Addition to Retained Earnings               50.00

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