Question

E1-4 Completing a Balance Sheet and Inferring Net Income LOZ, LO3) Ken Young and Kim Sherwood organized Reader Direct as a corporation, each contributed $66,150 cash to start the business and received 5,400 shares. The store completed its first year of operations on December 31 2017. On that date, the following financial items for the year were determined cash on hand and in the bank $55,200, amounts due from customers from sales of books, $36,000: property and equipment, $79.500, amounts owed to publishers for books purchased, $12,200; one-year note payable to a local bank for $9,150. No dividends were declared or paid to the shareholders during the year. Required: 1 Complete the balance sheet at December 31, 2017: READER DIRECT Balance Sheet At December 31, 2017 Assets Liabilities Total liabilities Shareholders' equity Total shareholders' equity Total abilities & shareholders' equity Total assets 2. Using the retained earnings equation and an opening balance of so, work backward to compute the amount of net income for the year ended December 31, 2017 Not income 3. As of December 31, 2017, did most of the financing for assets come from creditors or shareholders? Creditors Shareholders

Answer 1

1.)	Reader Direct
	Balance Sheet
	At December 31,2017
	Assets	Amount $	Liabilities	Amount $
	Cash on Hand & Bank	55,200	Accounts Payable	12,200
	Accounts Receivable	36,000	Notes Payable	9,150
	Property & Equipment	79,500	Total Liabilities	21,350
			Shareholder's Equity
			Common Stock	132,300
			Retained earnings	17,050
			Total Shareholder's Equity	149,350
	Total Assets	170,700	Total Liabilities & Shareholder's Equity	170,700
				-
2.)	Net income
		Amount $
	Retained earnings on Dec.31,2017	17,050
	Add: Dividend	0
	Less: Opening Balance	0
	Net Income	17,050

3.)	As of December 31,2017, most of the financing comes from Shareholders.

4.)

Ending retained earnings -2018

$ 19,800

=17050+5450-2700