Question

The Mentha Company was incorporated on July 1, 20X1. Mentha had 10 holders of common stock. Laurie Mentha, who was the president and CEO, held 49% of the shares. The company rented space in chain discount stores and specialized in selling running shoes. Mentha's first location was a store in Centerville Mall. The following events occurred during July A. The company was incorporated. Common stockholders invested $145,000 cash. B. Purchased merchandise inventory for cash, S55,000 C. Purchased merchandise inventory on open account, $28,000 D. Merchandise carried in inventory at a cost of $42,000 was sold for $90,000 $30,000 for cash and $60,000 on open account. Mentha carries and will collect these accounts receivable. E. Collection of a portion of the preceding accounts receivable, $25,000 F. Payments of a portion of accounts payable, $15,000. See transaction C. G. Special display equipment and fixtures were acquired on July 1 for $48,000. Their expected useful life was 48 months with no terminal scrap value Straight-line depreciation was adopted. This equipment was removable Mentha paid $15.000 as a down payment and signed a promissory note for $33,000 H. On July 1, Mentha signed a rental agreement with Centerville Mall. The agreement called for rent of $1,550 per month, payable quarterly in advance. Therefore, Mentha paid $4,650 cash on July 1. I. The rental agreement also called for a payment of 15% of all sales. This payment was in addition to the flat $2.350 per month. In this way, Centerville Mall would share in any success of the venture and be compensated for general services such as cleaning and utilities. This payment was to be made in cash on the last day of each month as soon as the sales for the month were tabulated. Therefore, Mentha made the payment on July 31. 1. Wapos, salaries, and sales commissions were all paid in cash for all earnings by employees. The amount was 530,000 K. Depreciation expense for July was recognized. See transaction G. L. The expiration of an appropriate amount of prepaid rental service was recognized. Seetraction. L Prepare an analysis of Menthe Company'transactions, employing the equation approach demonstrated in Echt 15.1 PE621). The additional com be needed, one for Equipment and F ures and one for Note Perre Show all amounts in thousands 2 Prepare a balance sheet as of July 31, 20XT, and an income Matement for the month of recome Given the spare for analye Mentha performance for July and in financial as of July, 2XT. please answer questions 1,2,3 15-1 Balance Sheet Equation Sacks Fifth operates 197 fashion specialty retail stores in 28 states. The company's actual data (slightly simplified) follow for its fiscal year ended June 15, 2009 in millions of dollars); $5.850 Assets, beginning of period Assets, end of period Liabilities, beginning of period Liabilities, and of period Paid-in capital, beginning or period Paid-in capital, end of period Retained camnings, beginning of period Retained carning, end of period Revenues Costs and expenses Net income Dividends Additional investments by stockholders Find the unknowns (in millions), showing computations to support your answers

Answer 1

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Mentha transactions company for July 2016 (in thousands Analysis of of dollars). Assets - - Accounts Receivable + Merchandise Inventory prepaid Rent Equipment pintures Liabilities & Stockholders equity Liabilities Stockholders equity Notes Accounts paid in Retained payablet payable & capital t Earnings + 145 + & = a. Incorporation be purchased merchandise $745 55 +55 co purchased +28 +60 -42 +90 (revenue) -42 (expense) -25 merchandise dr-sales +30 da cost of inventory dold e collections +25 fo Disbursements 15 to (sedinis go porchased -15 jopren ho prepaid sear - 4065 i Reot expense - 1305 j. wages ex - 30 co Depreciation 1. Rent expense - +48 +33 +465 - 13.5 (expense) - 30 (expens) - (expense) -1.55 (expense) +1.95 - 1055 Balances, July 30, +66.85 2011 +35 +41 +37 +47 +55 +3 +45 +1095 +41 +3-1 +47 +33 +13 + 145 Solution 199.95 192.95

Mentha company Income Statement the month ended July , 30 2041 For particulars Amount Amount $90000 442000 930000 1JOSO Sales (revenue) (A) De doct expenses: - cost of goods sold - Wager, salaries & commission - Rent (1550 + 13500] - Deprecation Toral expenses (B) Net income (A-B) ť 1000 9 8800 KW $1950 Mentha company Balance sheet July 30, 20x! Assets Amounts I Liabilities & Stock holders. Amount evoty cash 66850 Liabilities Accounts receivable I $35000 | Accounts payable ($13000 prepaid sent $3100 Notes payable 1 { 13000 Merchandise inventory I $ 41000 Tokal Liability (A) 346000 iment i fixtures 1 $47.000 stockholders (net) . I equity : I paid in capital $ 145000 Retained earnings $ 1950 Toral Stockholders equity (0) $ 146950 Toral liabilities is stocacholders- Total Assets $ 192950 equity | $192950 (A+B)

③ Most businesses tend to have met losses during their Start-up phase, So Mentha's ability to show a net income for Joly is good. Many points can be raised, including the problem of maintaining an "option" cash balance so that creditors can be paid neither too quick by nor too slowly. working Notes for : i Rent expense (h) = 15% of all sales = 154.X & 90000 = $13.500 (or) & 13°5 (in thousands) " Depreciation (k) - cost of Asset life of Asser = 8 48000 48 Honths = $ 1000 cor) & 1 (in thousands)