Question

The Extra Surplus Company's Balance Sheet for December 31, 2017 and the Income Statement for 2018 are shown below. Extra Surplus Company Balance Sheet December 31, 2017 Assets Cash Accounts Receivable Inventory Property and Equipment, Net $ 20,000 10,000 24,000 40,000 $94,000 Liabilities and Stockholders' Equity Accounts Payable Notes Payable, Long-Term Common Stock Retained Earnings $ 20,000 10,000 40,000 24,000 $ 94,000 Extra Surplus Company Income Statement For the Year Ended December 31, 2018 Sales $39,000 Cost of Goods Sold 9,000 Salaries and Wage Expense 9,000 Interest Expense 3,000 Other Expenses 1,500 Net Income $16,500 Additional data: • Sales were $39,000; $24,000 in cash was received from customers. • Bought new land for cash, $30,000. • Sold other land for its book value of $15,000. • Paid $3,000 principal on the long-term note payable and $3,000 in interest. • Issued new shares of stock for $30,000 cash. • Cash dividends of $5,000 were declared and paid to stockholders. • Paid $17,500 on accounts payable. • No inventory purchases were made; other expenses were incurred on account. • All wages were paid in cash.

Answer 1

	The first step is to prepare the adjusted trial balance:
	Adjusted Trial Balance
	as at 31 March 2018
		Balance
	Account Name	Debit	Credit
	Cash	$      21,500
	Accounts Receivable	$      25,000
	Inventory	$      15,000
	P&E, Net	$      55,000
	Accounts Payable		$        4,000
	Notes payable - Long Term		$        7,000
	Common stock		$      70,000
	Retained earnings	$             -	$      24,000
	Sales	$                   -	$         39,000
	Cost of goods sold	$            9,000
	Dividends	$            5,000
	Salaries and wages	$            9,000
	Interest expense	$            3,000
	Other expenses	$            1,500
	Total	$    1,44,000	$   1,44,000
	INC0ME STATEMENT
	Sales		$         39,000
	Cost of goods sold		$           9,000
	Gross profit		$         30,000
	Expenses:
	Salaries and wages	$            9,000
	Interest expense	$            3,000
	Other expenses	$            1,500
	Total expenses		$         13,500
	Net income		$         16,500
a]	BALANCE SHEET
	Assets
	Current Assets:
	Cash	$      21,500
	Accounts Receivable	$      25,000
	Inventory	$      15,000
	Total current assets		$         61,500
	Non-Current assets:
	PP&E, Net	$      55,000
	Total non current assets		$         55,000
	Total assets		$     1,16,500
	Liabilities and stockholders' equity
	Current liabilities:
	Accounts Payable	$        4,000
	Total current liabilities		$        4,000
	Notes payable - Long Term		$        7,000
	Total liabilities		$      11,000
	Common stock	$      70,000
	Retained earnings	$      35,500
	Stockholders' equity		$   1,05,500
	Total liabilities and Equity		$   1,16,500
b]	Statement of cash flows
	Cash flow from operating activities:
	Cash collected from customers	$         24,000
	Cash paid for interest	$          -3,000
	Cash paid to employees	$          -9,000
	Cash paid to suppliers of inventory	$        -17,500
	Net cash used in operating activities		$          -5,500
	Proceeds from sale of land	$         15,000
	Purchase of land	$        -30,000
	Cash used in investing activities:		$       -15,000
	Cash flow from financing activities:
	Payments on long term debt	$          -3,000
	Payments of cash dividends	$          -5,000
	Proceeds from issuing common stock	$         30,000
	Net cash provided by financing activities		$         22,000
	Increase in cash during the year		$           1,500
	Cash and cash equivalents, beginning of the period		$         20,000
	Cash and cash equivalents, end of the period		$         21,500