Gary’s TV had the following accounts and amounts in its financial statements on December 31, 2019. Assume that all balance sheet items reflect account balances at December 31, 2019, and that all income statement items reflect activities that occurred during the year then ended.
| Interest expense | $ | 4,500 |
| Paid-in capital | 10,000 | |
| Accumulated depreciation | 3,000 | |
| Notes payable (long-term) | 35,000 | |
| Rent expense | 9,000 | |
| Merchandise inventory | 106,000 | |
| Accounts receivable | 28,000 | |
| Depreciation expense | 1,500 | |
| Land | 19,000 | |
| Retained earnings | 122,000 | |
| Cash | 20,000 | |
| Cost of goods sold | 220,000 | |
| Equipment | 10,000 | |
| Income tax expense | 30,000 | |
| Accounts payable | 13,000 | |
| Net sales | 310,000 | |
Required:
- Calculate the difference between current assets and current liabilities for Gary’s TV at December 31, 2019.
- Calculate the total assets at December 31, 2019.
- Calculate the earnings from operations (operating income) for the year ended December 31, 2019.
- Calculate the net income (or loss) for the year ended December 31, 2019.
- What was the average income tax rate for Gary’s TV for 2019?
- If $32,000 of dividends had been declared and paid during the year, what was the January 1, 2019, balance of retained earnings?
Homework Answers
Answer -
| Calculation | |||
| a. | Difference between current assets and current liabilities |
Merchandise Inventory + Accounts Receivable + Cash - Accounts Payable = $106000 + $28000 + $20000 - $13000 |
$141000 |
| b. | Total assets |
Merchandise inventory + Accounts receivable + Land + Cash + Equipment - Accumulated depreciation = $106000 + $28000 + $19000 + $20000 + $10000 - $3000 |
$180000 |
| c. | Operating income |
Net sales - Cost of goods sold - Rent Expense - Depreciation expense = $310000 - $220000 - $9000 - $1500 |
$79500 |
| d. | Net income |
Operating income - Interest expense - Income tax expense = $79500 - $4500 - $30000 |
$45000 |
| e. | Average income tax rate |
Income tax expense / (Operating income - Interest expense) = $30000 / ($79500 - $4500) |
40% |
| f. | Retained earnings as on January 1, 2019 |
Retained earnings as on December 31, 2019 - Net income + Dividend paid = $122000 - $45000 + $32000 |
$109000 |
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a. Calculate
the difference between current assets and current liabilities for
Gary’s TV at December 31, 2016.
b. Calculate the total assets at December 31,
2016.
c. Calculate the earnings from operations
(operating income) for the year ended December 31, 2016.
d. Calculate the net income (or loss) for the
year ended December 31, 2016.
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Gary’s TV for 2016?
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and paid during the...
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c. Calculate the earnings from operations
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c. Calculate the earnings from operations
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