Question

Preparo Read pages 12-18 and read the article "What It Takes to Be Great". Remember this article is fair game for all tests and quizzes. Problem 2 You have decided to start a business selling widgets. You form a corporation, Widgets, Inc. You paid $10 per share for 1,000 shares of stock on January 1, 2020. Next the company borrowed $30,000 from your Aunt Suzie. For the $30,000 borrowed from your aunt, the company agrees to pay back that amount on December 31, 2026 and to pay interest at 10% at the end of each year. On January 1, 2020, the company bought 6 widgets for $3,000 each. During the year, it sold 4 widgets for $8,000 each. The company also paid a security deposit of $1,000, advertising expense of $2,000, and 12 months of rent, $12,000. Widgets, Inc. bought a delivery van on December 31st that cost $20,000, putting $5,000 down on the van and agreeing to pay the balance next year. On December 31 the company paid the first year's interest to Aunt Suzie of $3,000. the tax rate is 30% of income before taxes and the taxes will be paid in 2021. Prepare T accounts, an income statement, statement of owners' equity and a balance sheet I was taught that the way of progress is neither swift nor eas Madame Marie Cur

Answer 1

alt Accounts Dr Cash Account Date Date Particulars 1/1/2020 To Share Capital Particulars 1/1/2020 By Widgets $ 10,000 $ 18,000 1/1/2020 To Aunt Suzie (Borrowing) During the year To Sales 30,000 During the year By Security Deposit 32,000 During the year By Advertisement expense During the year By Rent Expense 31/12/2020 By Delivery Van 31/12/2020 By Interest Expense $ $ $ 1,000 2,000 12,000 5,000 3,000 31/12/2020 By Balance Closed down $ 31,000 $ 72,000 $ 72,000 Cr Share Capital Account Date Date Particulars Particulars 1/1/2020 By Cash 10,000 31/12/2020 To Balance Closed down 10,000 10,000 $ 10,000

Aunt Suzie Account (Borrowing) Date Particulars $ Particulars 1/1/2020 By Cash 30,000 31/12/2020 To Balance Closed down 30,000 30,000 30,000 Date Interest Expense Account Date 3,000 Particulars 31/12/2020 To Cash Particulars $ 31/12/2020 By P&L 3,000 3,000 3,000 Date Particulars 1/1/2020 To Opening Stock 1/1/2020 To Cash Widgets Account Date Particulars During the year By Cost of goods sold $ 18,000 31/12/2020 By Closing Stock 12,000 6,000 18,000 18,000 Date Particulars 1/1/2020 To Widgets Particulars Cost of goods sold Date $ 12,000 31/12/2020 By P&L 12,000 12,000 12,000

Sales Account Date Particulars Date During the year Particulars By Cash $ 32,000 31/12/2020 To P&L $ 32,000 32,000 $ 32,000 Date During the year Particulars Security Deposit Account Date $ 1,000 Particulars To Cash 31/12/2020 By Balance Closed down $ 1,000 $ 1,000 1,000 Dr Date During the year Particulars To Cash $ Advertisement Expense Account Date Particulars $ 2,000 31/12/2020 By P&L $ 2,000 $ 2,000 $ 2,000 Date Rent Expense Account Date $ 12,000 Particulars To Cash Particulars During the year 31/12/2020 By P&L $ 12,000 $ 12,000 $ 12,000

Particulars Particulars 31/12/2020 To Cash 31/12/2020 To Vehicle Loan Delivery van Account Date 5,000 15,000 31/12/2020 By Balance Closed down $ 20,000 $ 20,000 20,000 Vehicle Loan Account Date Date Particulars Particulars 31/12/2020 By Delivery Van 15,000 31/12/2020 To Balance Closed down $ 15,000 15,000 15,000 Date Tax Expense Account Date 900 Particulars 31/12/2020 To Tax Payable Particulars 31/12/2020 By P&L 900 900 900 Tax Payable Account Date Particulars Particulars 31/12/2020 By Tax Expense 900 31/12/2020 To Balance Closed Down 900 900 900

b Trial Balance Debit Credit 31,000 $ 10,000 30,000 3,000 6,000 12,000 Particulars Cash Account Share Capital Account Aunt Suzie Account (Borrowing) Interest Expense Account Widgets Account Cost of goods sold Sales Account Security Deposit Account Advertisement Expense Account Rent Expense Account Delivery van Account Vehicle Loan Account Tax Expense Account Tax Payable Account 32,000 1,000 2,000 12,000 20,000 15,000 900 Total 87,900 $ 87,900

Widgets Inc. Income Statement For the year ended December 31, 2020 Particulars Sales $ 32,000 Total Sales 32,000 Less Expense: Cost of goods sold Advertisement Expense Rent Expense Interest Expense Account 12,000 2,000 12,000 3,000 Total Expense $ 29,000 Net Income Before Tax $ 3,000 Tax Expense (30%) $ (900) Net Income after Tax $ 2,100

mit in 19 Widgets Inc. Statement of Shareholder's Equity For the year ended December 31, 2020 Share Capital Retained Earnings Total - 2,100 $ $ 10,000 m Balance, January 1, 2020 Add: Net Income for 2020 Add: Issuance of Common Stock Less: Dividends paid Balance, December 31, 2020 2,100 10,000 $ $ 10,000 $ 2,100 $ 12,100 m in 1 Widgets Inc. Balance Sheet December 31, 2020 m ASSETS Current Assets Security Deposit Cash Inventory Total Current Assets $ $ $ 1,000 31,000.00 6,000.00 m $ 38,000.00 to 1 Fixed Assets Delivery van Total Fixed Assets $ 20,000.00 $ 20,000.00 Total Assets $ 58,000.00

Total Assets $ 58,000.00 LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Tax Payable $ 900.00 Total Current Liabilities $ 900.00 Non Current Liabilities Aunt Suzie (Borrowing) Vehicle Loan Total Non Current Liabilities $ $ 30,000.00 15,000.00 $ 45,000.00 Total Liabilities $ 45,900.00 STOCK HOLDER'S EQUITY Share Capital Retained Earnings $ $ 10,000.00 2,100.00 Total Stockholder's Equity $ 12,100.00 Total Liabilities and Stockholder's Equity $ 58,000.00