Question

Question 1 (20%) The following items are taken from the financial statements of Trump Company for 2017 Accounts payable Accounts receivable Accumulated depreciation-equipment Advertising expense Cash Common stock Depreciation expense Dividends Equipment Insurance expense Notes payable (due 2020) Prepaid insurance Rent expense Retained earnings (beginning) Salaries and wages expense Salaries and wages payable Service revenue Supplies Supplies expense $ 10,000 11,000 38,000 21,000 14,000 90,000 12,000 15,000 210,000 3,000 70,000 6,000 17,000 12,000 34,000 3,000 130,000 4,000 6,000 Instructions: (a) Calculate the net income. (b) Calculate the retained earnings balance that would appear on a balance sheet at December (c) Prepare a classified balance sheet for Tracy Company at December 31, 2017 assuming the (d) Compute the current ratio, debt to assets ratio, and earnings per share value. The average 31, 2017 note payable is a long-term liability number of shares outstanding for 2017 was 10,000.

Answer 1

A) COMPUTE NET INCOME :

REVENUE : SERVICE REVENUE TOTAL REVENUE	130000 130000
LESS: EXPENSES :
ADVERTISING EXPENSES	(21000)
DEPRECIATION EXPENSES	(12000)
INSURANCE EXPENSES	(3000)
RENT EXPENSES	(17000)
SALARY & WAGES EXPENSES	(34000)
SUPPLIES EXPENSES	(6000)
TOTAL EXPENSES	(93000)
NET INCOME	37000

STATEMENT OF RETAINED EARNINGS :

BEGINNING BALANCE	12000
ADD: NET INCOME	37000
LESS: DIVIDEND	(15000)
ENDING BALANCE	34000

C) PREPARE CLASSIFIED BALANCE SHEET :

ASSETS:
CURRENT ASSETS
CASH	14000
ACCOUNT RECEIVABLE	11000
PREPAID INSURANCE SUPPLIES	6000 4000
TOTAL CURRENT ASSETS		35000
PROPERTY,PLANT & EQUIPMENT
EQUIPMENT	210000
LESS: ACCUMLATED DEPRECIATION	(38000)	172000
TOTAL ASSETS		207000
LIABILITIES & SHAREHOLDER'S EQUITY
CURRENT LIABILITY
ACCOUNT PAYABLE	10000
SALARY & WAGES PAYABLE	3000
TOTAL CURRENT LIABILITY		13000
LONG TERM LIABILITY
NOTE PAYABLE		70000
SHAREHOLDER'S EQUITY
COMMON STOCK	90000
RETAINED EARNING	34000
TOTAL SHAREHOLER'S EQUITY		124000
TOTAL LIABILITY & SHAREHOLER'S EQUITY		207000