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Popes Garage had the following accounts and amounts in its financial statements on December 31, 2016. Assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year then ended Accounts receivable Depreciation expense Land Cost of goods sold Retained earnings Cash Equipment Supplies Accounts payable Service revenue Interest expense Common stock Income tax expense Accumulated depreciation Long-term debt Supplies expense Merchandise inventory Sales revenue $ 30,800 11,300 25,600 87,500 60,900 11,000 69,500 5,400 20,500 20,900 2,600 7,000 15,730 44,000 35,000 13,000 25,100 154,000 Required a. Calculate the total current assets at December 31, 2016 Total current assets b. Calculate the total liabilities and stockholders equity at December 31, 2016 Total liabilities and stockholders equityc. Calculate the earnings from operations (operating income) for the year ended December 31, 2016. Operating income d. Calculate the net income (or loss) for the year ended December 31, 2016 e. What was the average income tax rate for Popes Garage for 2016? Average income tax rate f. If $19,500 of dividends had been declared and paid during the year, what was the January 1, 2016, balance of retained earnings? Retained earnings

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Answers are highlighted in yellow: Solution Particulars Cash Accounts Receivable Supplies Merchandise Inventory Amount $ 11,000 $30,800 $ 5,400 $25,100 $ 72,300 a) Current Assets Particulars Accounts Payable Long term debt Common stock Retained Earning Total Liabilities and Stockholders equity Amount $ 20,500 $35,000 $7,000 $60,900 123400 b) Particulars Sales Revenue Service Revenue Total Revenue Less: Cost of goods sold Gross Profit Less: Operating expense: Depreciation expense Supplies Expense Amount 154000 20900 174900 $87,500 $87,400 $ 11,300 $ 13,000 $ 24,300 c) Operating Income $ 63,100

d) Particulars Operating Income Less: Interest Expense Income before tax Less: Income Tax expense Net Income Amount $63,100 $2,600 $60,500 $ 15,730 44,770 e) Average income tax rate (15730/60500- 26% f Particulars Amount Ending Retained Earning Less: Net Income Add: Dividend Retained Earning, January 1, 2016 $60,900 $ -44,770 $ 19,500 $ 35,630

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