Question

i More Info a. On January 1, 2018, ARC issued no par common stock for $450,000. b. Early in January, ARC made the following cash payments: 1. For store fixtures, $53,000 2. For merchandise inventory, $340,000 3. For rent expense on a store building, $20,000 c. Later in the year, ARC purchased merchandise inventory on account for $239,000. Before year-end, ARC paid $139,000 of this accounts payable. d. During 2018, ARC sold 2,400 units of merchandise inventory for $275 each. Before year-end, the company collected 85% of this amount. Cost of goods sold for the year was $250,000, and ending merchandise inventory totaled $329,000. e. The store employs three people. The combined annual payroll is $96,000, of which ARC still owes $3,000 at year-end. f. At the end of the year, ARC paid income tax of $17,000. There are no income taxes payable. g. Late in 2018, ARC paid cash dividends of $44,000. h. For store fixtures, ARC uses the straight-line depreciation method, over five years, with zero residual value. Print Print Done Done

Answer 1

2.

Income Statement
Revenue
Sales Revenue		$           660,000	=2400*275
Expenses
Cost of Goods Sold	$       250,000
Salaries Expense	$         96,000
Depreciation	$         10,600		=53000/5
Rent Expense	$         20,000
Income tax expense	$         17,000
Total Expenses		$           393,600
Net Income		$           266,400

3.

Balance Sheet
Assets
Current Assets
Cash	$       305,000		=450000-53000-340000-20000+660000*85%-139000-44000-93000-17000
Accounts Receivable	$         99,000		=660000*15%
Merchandise Inventory	$       329,000
Total Current Assets		$           733,000
Property, Plant and Equipment
Store Fixtures	$         53,000
Less : Accumulated Depreciation	$       -10,600	$             42,400
Total Assets		$           775,400
Liabilities
Current Liabilities
Accounts Payable	$       100,000		=239000-139000
Salaries Payable	$           3,000
Total Current Liabilities		$           103,000
Stockholder's Equity
Common Stock	$       450,000
Retained Earnings	$       222,400		=266400-44000
Total Stockholder's Equity		$           672,400
Total Liabilities & Stockholder's Equity		$           775,400

4.

Cash Flow Statement
Direct Method
Cash Flow from Operating Activities
Cash Collected from Customers		$     561,000.00		=660000*85%
Cash paid for inventory		$   -479,000.00		=-(340000+139000)
Cash paid for Salaries		$      -93,000.00		=-(96000-3000)
Cash paid for Rent		$      -20,000.00
Cash paid for Income tax		$      -17,000.00
Cash from Operating Activities			$     -48,000.00
Cash flow from Investing Activities
Purchase of Store Fixtures		$      -53,000.00
Net cash used In investing activities			$     -53,000.00
Cash flow from Financing Activities
Issue of Common Stock		$     450,000.00
Dividend Paid		$      -44,000.00
Net cash used in financing activities			$    406,000.00
Increase in Cash			$    305,000.00
Opening Balance of Cash			$                      -
Closing Balance of Cash			$    305,000.00