Question

Gary's TV had the following accounts and amounts in its financial statements on December 31, 2019. Assume that all balance sheet items reflect account balances at December 31, 2019, and that all income statement items reflect activities that occurred during the year then ended. Interest expense Paid-in capital Accumulated depreciation Notes payable (long-term) Rent expense Merchandise inventory Accounts receivable Depreciation expense Land Retained earnings Cash Cost of goods sold Equipement Income tax expense Accounts payable Net sales $ 5,700 19.600 5.400 59,000 12,600 130,000 46.000 2,700 43,000 158,500 26,500 244,000 34,000 66,000 37.000 430.000

Answer 1

Answer:

a	Difference	$165,500
b	Total assets	$274,100
c	Operating income	$170,700
d	Net income	$99,000
e	Average tax rate	66.67%
f	Retained earnings	$85,500

Calculations:

a. Difference

Current Assets
Cash	$26,500
Merchandise inventory	$130,000
Accounts receivable	$46,000
Total Current assets (i)	$202,500
Current liabilities
Accounts payable	$37,000
Total current liabilities (ii)	$37,000
Difference (i-ii)	$165,500

b.Total assets

Assets
Cash	$26,500
Merchandise inventory	$130,000
Accounts receivable	$46,000
Land	$43,000
Equipment	$34,000
Accumulated depreciation	($5,400)
Total assets	$274,100

c.Operating income

Net sales		$430,000
Less: Cost of goods sold		($244,000)
Gross profit		$186,000
Less: Operating expenses
Rent expense	$12,600
Depreciation expense	$2,700
Total operating expenses		$15,300
Operating income		$170,700

d.Net income

Operating income		$170,700
Non-operating income(expense)
Interest expense	($5,700)
Income tax expense	($66,000)
Total non-operating income(expense)		($71,700)
Net income		$99,000

e. Average tax = Income tax ÷ Net income = 66,000/99,000 = 0.66666 or 66.67%

f. Retained earnings

Retained earnings, Dec 31,2019	$158,500
Less: Net income	($99,000)
Add: Dividends	$26,000
Retained earnings, Jan 1,2019	$85,500