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Understanding and analyzing financial statement relationships-sales/ service organization Popes Garage had the following acc
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Answer #1

Requirement a:

Current assets
Cash $27,000
Accounts receivable $99,000
Supplies $18,000
Merchandise inventory $93,000
Total current assets $237,000

Requirement b:

Liabilities and stockholder's equity
Liabilities:
Accounts payable $69,000
Long-term debt $120,000
Stockholder's equity:
Common stock $30,000
Retained earnings $177,000
Total liabilities and stockholder's equity $396,000

Requirement c:

Operating income
Revenues:
Sales revenue $420,000
Service revenue $60,000
Total revenues $480,000
Operating expenses:
Cost of goods sold $270,000
Depreciation expense $36,000
Supplies expense $42,000
Total operating expenses $348,000
Operating income $132,000

Requirement d:

Net income
Operating income $132,000
Non-Operating income(Expense):
Interest expense ($12,000)
Income tax expense ($36,000)
Total non-operating income (expense) ($48,000)
Net income $84,000

Requirement e:

Average tax rate = (Income tax expense ÷ Net income) x 100

= 36,000/84,000 x 100

= 42.86%

Requirement f:

Retained Earnings
Retained Earnings, Jan 1,2016 $48,000
Add: net income $84,000
Retained Earnings, Dec 31,2016 $132,000
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