Question

Use the following information to prepare a multi-step income statement and a balance sheet for Sherman Equipment Co. for Year 2. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) (Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

Salaries Expense	$	79,000			Operating Expenses	$	72,000
Common Stock		100,000			Cash Flow from Investing Activities		88,400
Notes Receivable (short term)		34,000			Prepaid Rent		13,500
Allowance for Doubtful Accounts		8,800			Land		50,000
Uncollectible Accounts Expense		9,100			Cash		49,100
Supplies		2,200			Inventory		99,300
Interest Revenue		6,400			Accounts Payable		56,000
Sales Revenue		360,000			Salaries Payable		22,000
Dividends		4,500			Cost of Goods Sold		158,000
Interest Receivable (short term)		2,500			Accounts Receivable		66,000
Beginning Retained Earnings		86,000

SHERMAN EQUIPMENT CO. Income Statement For the Year Ending December 31, Year 2 Operating Expenses Total Operating Expenses Non-Operating Items

Answer 1

SHERMAN EQUIPMENT CO. Income Statement For the year ending December 31, Year 2 Sales Revenue 360,000 Less: Cost of goods sold $ (158,000) Gross Profit 202,000 Operating Expenses: Operating Expenses Salaries Expense 72,000 79,000 Uncollectible Accounts Expense 9,100 Total Operating Expenses Operating Profit Non-Operating items: Interest Revenue $ (160,100) 41,900 $ 6,400 Net Income 48,300

SHERMAN EQUIPMENT co. Statement of Retained Earnings For the year ending December 31, Year 2 Beginning Retained Earnings Add: Net Profit 86,000 48,300 134,300 (4,500) Less: Dividends Ending Retained Earnings 129,800

SHERMAN EQUIPMENT CO. Balance Sheet As of December 31, Year 2 Assets Non-Current Assets; Land 50,000 Total Non-Current Assets 50,000 Current Assets: 99,300 Inventory Notes Receivable (short term) 34,000 $ nts Receivable A 66,000 (8,800) $ Less: Allowance for doubtful accounts 57,200 Prepaid Rent 13,500 Supplies Interest Receivable( short term) 2,200 2,500 Cash 49,100 $ Total Current Assets 257,800 Total Assets 307,800 Liabilities and Shareholders' Equity Current Liabilities: Accounts Payable 56,000 Salaries Payable 22,000 Total Liabilities $ 78,000 Shareholders' Equity: Common Stock 100,000 $ Retained Earnings(Refer Statement of Retained Earnings) Total Shareholders' Equity 129,800 229,800 Total Liabilities and Shareholders' Equity $ 307,800 O