Question

Question 3 (20 points) XYZ Company was established at the beginning of 2019 when several investors paid a total of $200,000 to purchase XYZ common stock. No additional investments in common stock were made during the year. By December 31, 2019, XYZ had cash on hand of $45,000, office equipment of $40,000, inventory of $156.000 and accounts payable of $10,000. Sales for the year were $812,000. Of this amount, customers still owed $20,000. XYZ declared and paid dividends of $25,000 to its stockholders during 2019. Required: 1. Based on the information above, prepare a balance sheet for XYZ Company at December 31, 2019. Do not separate assets or liabilities into current and non-current. 2. Prepare a statement of stockholders' equity for the year ended December 31, 2019. 3. What was the amount of XYZ's net income for 2019? 4 Wac XYZ successful during its first vear in operation? Explain your answer.

Answer 1

Answer-1:

XYZ Company Balance Sheet As of December 31, 2019 Cash on hand Office equipment Inventory Account receivable Total 45,000 Account payable 40,000 Common stock 1,56,000 Retained earnings (Bal. fig.) 20,000 2,61,000 Total $ 10,000 2,00,000 51,000 2,61,000

Answer-2:

XYZ Company Statement of Stock hoder's Equity As of December 31, 2019 Common stock $2,00,000 Add: Retained earnings 51,000 Total stock holder's equity 2,51,000

Answer-3:

Retained earnings Add: Dividend Net income for 2019 $ 51,000 25,000 76,000

Answer-4:

Yes, XYZ was successful during its first year of operation because it earned a net income of $76,000.