Question

Trevor Company's balance sheet for December 31, 20X0 is as follows: Cash 100 Accounts receivable 150 Interest Receivable 25 Inventory 120 Notes Receivable (long term) 500 Equipment, at cost 400 Accumulated depreciation, Equipment 150 Equipment, net 250 Total assets $1,145 Accounts payable 140 Wages payable 20 Unearned sales revenue 30 Paid-in-capital 600 Retained income 355 Total liabilities and $1,145 stockholders' equity The following summarized transactions occurred during 20X1: a Purchased merchandise inventory on credit, $750. Delivered merchandise to customers who had paid in advance as of December 31, 20X0. c. Sales of merchandise (all on credit and excluding transaction b) during 20X1 were $2,500 d The cost of merchandise sold (including that in transaction b) during 20X1 was $800. e. Collection from credit customers was $2,000 Interest on notes receivable of 12% per annum was collected each August 1 g Cash payment to suppliers, $750 (see item: a) h Cash payment for wages during 20X1 was $200. i. New equipment was purchased on December 10 for $250 in cash Cash dividend of $50 was declared on December 20, 20X1. The payment date of dividends was January 10, 20X2. The following adjustments were made on December 31,20X1: k. Accrual of interest receivable (to be computed, see item f) 1. Depreciation for 20X1, S75 Required 1. Analyze the above transactions. Use the balance sheet equation format (spread sheet) 2. Prepare income statement for the year 20X1. Assume that the company does not have to pay taxes. 3 Also prepare the statement of cash flows for 20X1. Use the direct method, i.e. list separately the cash inflow/outflow entries for operations, investing, and financing activities

Answer 1

Trevor Company Accounting Equation Shareholders Fquity Liahilities Assets Accounts Payable +Wages Payable ash + Accounts Receivable Interest Receivable +Inventory + Notes Receivable Fquipment Uneamed Sales Rev. pividend Payable Common Stock Retained Earnings Trans Accum, Depre + 150 Son 100 2" 400 11 20 30 con. 355 Sales recagnized + 30 3C Sales on account 2500 + 2500 00 s00 Cost of goods sold C 2000 60 25 Interest income + 750 750 -200 Wages paid 250 Dividend declared 50 -51 4 25 Interest Receivable + Depreciation - 70 Total 60 500 650 и 50 2630 2630

Statement of Cashflows For the period ending 31.12.20x1 Cashflows from Operating Income Collection from Customers 2000 Payments to Creditors -750 Interest received 60 Payment of Wages -200 Cash generated from Operating Activity 1110 Cashflows from Investing Income Equipment purchased -250 Cash used for Investment activity Cashflows from Financing Income Cash generated from Financing Activity Net Increase in Cash 860 Beginning Cash Balance 100 Ending Cash Balance 960 Statement of Income For the period ending 31.12.20x1 Sales 2530 Cost of goods sold -800 Gross Profit 1730 Less Wages Expense 200 Depreciation Expense 75 275 Operating Income 1455 Interest income 60 Net Income 1515