MUMBO JUMBO MOTEL CORPORATION | |
Profit & loss statement | |
Amount | |
Sales | $240000 |
(-) Cost of goods sold | $192000 |
Gross profit | $48000 |
(-) Operating expenses | $39000 |
Operating profit | $9000 |
(-) Interest expense | $3240 |
Net income before taxes | $5760 |
(-) taxes | $864 |
Net income | $4896 |
MUMBO JUMBO MOTEL CORPORATION | ||
Balance sheet | ||
Amount | ||
ASSETS | ||
Non Current assets : | $50000 | |
Building | $50000 | |
Current assets : | $126000 | |
Inventory | $44000 | |
Prepaid expenses | $4000 | |
Accounts receivable | $68000 | |
Cash | $10000 | |
Total Assets | $176000 | |
EQUITY AND LIABILITIES | ||
Equity : | $90000 | |
Common stock | $25000 | |
Retained earnings | $65000* | |
Liabilities : | ||
Non current liabilities | $36000 | |
Long term debt | $36000 | |
Current liabilities | $50000 | |
Accounts payable | $30000 | |
Notes payable | $14000 | |
Accrued expenses | $6000 | |
Total liabilities | $86000 | |
Total Equity and Liabilities | $176000 |
*Retained earnings = Total assets - Total liabilities - common stock
= $176000 - $86000 - $25000
= $65000
Note : The above balance sheet is prepared based on the assumption that the retained earnings of $63000 given in the question is in adjusted balance. So the adjusted balance of retained earnings is calculated by taking it as the balancing figure.
However, if the retained earnings is taken as $63000 then a new assumption has to be made i.e. $2000 of dividends has been paid. In that case, cash balance needs to be updated by reducing $2000. Then cash balance becomes $8000 ($10000 - $2000), so total assets balance will be $174000 ($176000 - $2000). Similarly, Total equity and liabilities balance will be $174000.
In that case the balance sheet would look like this:
MUMBO JUMBO MOTEL CORPORATION | ||
Balance sheet | ||
Amount | ||
ASSETS | ||
Non Current assets : | $50000 | |
Building | $50000 | |
Current assets : | $126000 | |
Inventory | $44000 | |
Prepaid expenses | $4000 | |
Accounts receivable | $68000 | |
Cash | $8000 | |
Total Assets | $174000 | |
EQUITY AND LIABILITIES | ||
Equity : | $88000 | |
Common stock | $25000 | |
Retained earnings | $63000 | |
Liabilities : | ||
Non current liabilities | $36000 | |
Long term debt | $36000 | |
Current liabilities | $50000 | |
Accounts payable | $30000 | |
Notes payable | $14000 | |
Accrued expenses | $6000 | |
Total liabilities | $86000 | |
Total Equity and Liabilities | $174000 |
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