Use the following information for questions 22 – 30 regarding Broad Street Co. in 2015 (assume...
Use the following information for questions 22 – 30 regarding Broad Street Co. in 2015 (assume this is the first year of operations for Broad Street Co., and assume Broad Street pays cash unless noted otherwise, even if it results in Broad Street having a credit balance in cash):
1/1 Issued 10,000 shares of common stock for $10 each
2/1 Pay $200,000 for equipment, 10 year useful life, $20,000
residual value, straight line depreciation ($18,000 depreciation
expense per year)
3/1 Sign a 5-year factory lease, paying full amount of $15,000
upfront
3/15 Deliver services to client and bill in full for $300,000
5/1 Purchase $40,000 worth of supplies on credit. By 12/31 10% of
supplies are left
8/1 Receive $350,000 in advance payment from a client for services
that will be performed by Broad Street in 2016
10/1 Declare and pay $20,000 in dividends
11/1 Purchase $140,000 in inventory
12/1 Pay $6,000 of the 5/1 purchase of supplies
23. What is the cash amount reported on the 12/31/15 Statement of Financial Position?
a. $119,000
b. $53,000
c. $89,000
d. $69,000
e. none of the above
29. What is 2015 Net Income (Loss)?
a. $225,000
b. $245,000
c. $215,000
d. $261,000
e. none of the above
Homework Answers
| DR. | CR. | ||
| 1-Jan | Cash | 100,000 | |
| Capital | 100,000 | ||
| 1-Feb | Equipment | 200000 | |
| cash | 200000 | ||
| 1-Mar | Advance lease | 15000 | |
| cash | 15000 | ||
| 15-Mar | A/R | 300000 | |
| Service revenue | 300000 | ||
| 1-May | Supplies | 40000 | |
| Accounts Payable | 40000 | ||
| 1-Aug | cash | 350000 | |
| unearned revenue | 350000 | ||
| 1-Oct | Dividend | 20000 | |
| cash | 20000 | ||
| 1-Nov | Purchases | 140000 | |
| cash | 140000 | ||
| 1-Dec | Accounts Payable | 6000 | |
| cash | 6000 |
| CASH | ||||
| 1-Jan | 100000 | |||
| 1-Feb | 200000 | |||
| 1-Mar | 15000 | |||
| 1-Aug | 350000 | |||
| 1-Oct | 20000 | |||
| 1-Nov | 140000 | |||
| 1-Dec | 6000 | |||
| 69000 |
balance in cash account at year end $69000
2.
| adjusting/closing entry | |||||
| 31-Dec | dep | 16500 | (18000/12)*11 | ||
| accumulated dep | 16500 | ||||
| (dep expense for CY) | |||||
| income summary | 16500 | ||||
| dep | 16500 | ||||
| (dep recognized in P&L) | |||||
| Lease expense | 2500 | ||||
| prepaid lease | 2500 | ||||
| (15000/5) | ((15000/5)/12)*10 | ||||
| income summary | 2500 | ||||
| Lease expense | 2500 | ||||
| Income summary | 36000 | ||||
| Supplies | 36000 | ||||
| (40000*90%) | |||||
| Income summary | 20000 | ||||
| dividend expense | 20000 |
| Revenue | ||
| Service revenue | 300000 | |
| Expenses | ||
| Depreciation | 16500 | |
| lease expense | 2500 | |
| Dividend | 20000 | |
| Supplies expense | 36000 | |
| Expenses | 75000 | |
| Net Income | 225000 |
Therefore net income is $225000
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