Question

The following information was taken from the accounting records of ZZ, Inc. for the year ended December 31, 2019:

Cash ........................ $26,000

Accounts Payable ............ $41,000

Sales Revenue ............... $95,000

Copyright ................... $37,000

Advertising Expense ......... ?

Common Stock ................ $97,000

Utilities Payable ........... $13,000

Supplies .................... $16,000

Cost of Goods Sold .......... $42,000

Rental Revenue .............. $29,000

Building .................... $86,000

Notes Payable ............... ?

Utilities Expense ........... $13,000

Inventory ................... $77,000

Dividends ................... $11,000

Equipment ................... $56,000

Retained Earnings ........... $59,000 (at January 1, 2019)

Income Tax Expense .......... $18,000

Accounts Receivable ......... $61,000

ZZ, Inc. reported total equity at December 31, 2019 of $187,000.

a) Calculate the total current assets reported in ZZ, Inc.'s balance sheet at December 31, 2019.

b) Calculate the total assets reported in ZZ, Inc.'s balance sheet at December 31, 2019.

c) Calculate the balance in the notes payable account at December 31, 2019.

d) Calculate the balance in the advertising expense account at December 31, 2019.

Answer 1

Answer:

1) The total current assets reported in ZZ, Inc.'s balance sheet at December 31, 2019 is as follows:

1. Cash =$26,000
2. Supplies=$16,000
3. Inventory=$77,000
4. Accounts Receivable=$61,000
5. Hence, total current asset (sum of a to d)=$180,000

Hence, from the above it can be concluded that the total current assets reported in ZZ, Inc.'s balance sheet at December 31, 2019 is $180,000

2) The total assets reported in ZZ, Inc.'s balance sheet at December 31, 2019 is as follows:

1. Cash =$26,000
2. Copyright=$37,000
3. Building= $86,000
4. Supplies=$16,000
5. Inventory=$77,000
6. Equipment=$56,000
7. Accounts Receivable=$61,000
8. Hence, total asset (sum of a to g)=$359,000

Hence, from the above it can be concluded that the total assets reported in ZZ, Inc.'s balance sheet at December 31, 2019 is $359,000

3) The balance in the notes payable account at December 31, 2019 is as follows:

1. Accounts Payable=$41,000
2. Utilities Payable=$13,000
3. Liabilities works out to (sum of a & b) =$54,000
4. The total asset at December 31, 2019=$359,000 (refer h of 2) above)
5. Total equity at December 31, 2019=$187,000.
6. Hence, Assets=Liabilities + Total Equity
7. Hence, $359,000=Liabilities+$187,000
8. Hence, Liabilities works out to $172,000
9. But at c) liabilities was derived as $54,000
10. Hence, the balance in the notes payable account at December 31, 2019 works out to $118,000 ($172,000-$54,000)

Hence, from the above it can be concluded that the balance in the notes payable account at December 31, 2019 works out to $118,000

4) The balance in the advertising expense account at December 31, 2019 is as follows:

1. Total equity at December 31, 2019 = $187,000=Common stock $97,000 + Retained earnings
2. Hence, Retained earnings at December 31, 2019 = $90,000
3. Retained earnings at January 1, 2019 = $59,000
4. Hence, $90,000+$11,000 (Dividends) - Net Income = $59,000
5. Hence, Net income = $42,000
6. Sales Revenue =$95,000
7. Rental Revenue =$29,000
8. Cost of Goods Sold = $42,000
9. Utilities Expense = $13,000
10. Income Tax Expense =$18,000
11. Hence, $95,000+$29,000-$42,000-$13,000-$18,000-Advertising expense= Net income $42,000
12. Hence, Advertising expense=$9,000

Hence, from the above it can be concluded that the balance in the advertising expense account at December 31, 2019 is $9,000.