Question

1. Use the appropriate items from the following list to prepare the income statement for DEF Inc. (Ended July 31st 2010)

Item	Value($000)
Accounts receivable	$350
Cost of goods sold	285
Amortization expense	55
General and administrative expense	60
Interest expense	25
Preferred share dividends	10
Sales revenue	525
Selling expense	35
Common shares	265
Retained earnings	325
Tax rate	40%

2. Use the appropriate items from the following list to prepare XYZ company’s balance sheet at July 31, 2011

Item	Value ($000) at July 31, 2011
Accounts payable	$ 220
Accounts receivable	450
Accruals (liabilities )	55
Buildings	225
Cash	215
Common shares	290
Cost of goods sold	2,500
Amortization expense	45
Equipment	140
Furniture and Fixtures	170
General expense	320
Inventories	375
Land	100
Long term debt	420
Machinery	155
Marketable securities	75
Line of credit	475
Preferred shares	100
Retained earnings	370
Sales Revenue	3,600
Vehicles	25

Answer 1

Income statement ($000)

Sales revenue	525
Cost of goods sold	- 285
Gross profit	240
Operating expenses:
Amortization expense	- 55
General and administrative expense	- 60
Selling expense	- 35
Operating profit	90
Interest expense	- 25
Profit before tax	65
Income tax	- 26
Net income	39

Balance sheet

Assets
Current assets
Cash	215
Accounts receivable	450
Inventory	375
Marketable security	75
Total current assets	1,115
Property, plant and equipment
Equipment	140
Furniture	170
Vehicles	25
Machinery	155
Building	225
Land	100
Property, plant and equipment (total)	815
Total assets	1,930
Liabilities and equity
Current liabilities
Accounts payable	220
Accruals	55
Line of credit	475
Total current liabilities	750
Long term debt	420
Stockholders' equity
Common stock	290
Preferred stock	100
Retained earnings	370
Total stockholders' equity	760
Total liabilities and equity	1,930

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