Question

Apple Inc. was formed in the current year with a $25 contribution from its owners. During the year, it sold $395 of merchandise of which it has collected $385 to date. The company paid $300 for the merchandise of which $35 was still on hand at the end of the year. The company also bought equipment of $30 in exchange for a Note Payable. The equipment has a 6-year estimated useful life. The company paid $32 in salaries. The company incurred and paid $1 of interest on the Note Payable for the year. It also paid on the first day of business $12 for rent for the next two years. Banks is subject to a 21% federal income tax rate on its pre-tax book income.

Prepare an Income Statement & Balance Sheet at the end of the first year of operations for Apple, Inc.

Answer 1

	Apple Inc.
	Income Statement
	Year ended …....
	Revenue
		Sales revenue		$395
	Expenses
		Cost of Goods Sold		$265	(0+300-35)	(COGS = Opening stock+purchases-closing stock)
		Salary expense		$32
		Interest expense		$1
		Depreciation expense		$6	(30/6)
		Rent expense		$6	(12/2)	(Rent paid on first day of business for 2 years), As per language of quesiton is ambiguous rent can
						also be 12/3 = $4.)
		Income tax expense		$17.85	((395-265-32-1-6-6)*21%)
	Net income(Loss)			$67.15
		Particulars
		Assets
		Cash	$64	(bal. fig.)
		Account receivable(Net)	$10	(395-385)
		Inventories	$35	(given in question)
		Prepaid expense	$6
		Equipment	$30
		Accumulated depreciation-equipment	-$5	(30/6)
		Total Assets	$140
		Liabilities
		Income tax payable	$18
		Note payables	$30
		Total liabilities	$48
		Shareholders' equity
		Common stock	$25
		Retained earnings	$67
		Total stockholders' equity	$92
		Total liabilities and stockholders' equity	$140