Question

Gamble company had following transactions of 2020:

            - When company started, received $19,000 from owners for stock

            -Purchased equipment of Jan 1. That cost $10,000 in cash. The equipment had a 3yr useful life and a $1,000 salvage value. Straight-line dep

            -Services provided for cash $7,000

            -$1,600 of supplies was purchased on account

            -Services provided on account were $9,500

            - November 1, the company paid cash of $3,600 in advance for 6 month’s rent, beginning immediately.

            -Cash collections on A/Rs amounted to $3,500

            -$500 of the A/P was paid

            - A $300 cash dividend was declared and paid to the owners.

A). Amount of total liabilities appearing on the Dec. 31, 2020 balance sheet would be?

B) What is the income for period ending Dec 31. 2020?

Answer 1

Solution : - A) Balance Shee As on 31st Dec 2020 Liabilities Owner Equity Creditor ( A/P) 29400 1100 Total 30500 Assets Equipment Debtor (A/R) Advance Rent Cash 7000 6000 2400 15100 Total 30500 Total Liabilities on 31st Dec 2020 is $ 30,500 Working Notes a Owner Equity Owner Stock Net Profit Total 19000 10400 29400 Creditor A/P Supplies Purchase on Account Less :- Payment to A/P Total 1600 -500 1100 C Equipment Cost of Equipment Less : - Depreciation Total 10000 -3000 7000 d 9500 Debtor (A/R) Service Provided on Account Less :- Cash Collected from A/R Total -3500 6000 e Advance Rent Payment for Advace Rent Less :- Rent claim for Two Month Total 3600 1200 2400

f Cash Received from owner Service Proved in cash Cash collection from A/R Less :- Equipment Purchase Less :- Paid to A/P Less :- Advance Rent Paid Less :- Dividend Paid Total 19000 7000 3500 -10000 -500 -3600 -300 15100 B) Calculation of Income for the period Ended 31st Dec 2020 Gross Income Service provided (in cash) Service provided (On Account) 7000 9500 Total (A) 16500 Less :- Supplies Purchase 1600 Gross Profit (B) 14900 Indirent Expenses 3000 Depreciation = ($ 10,000 - $ 1,000) / 3 Year 1200 Rent for Building = $ 3,600 X 2/6 (for two month only) Dividend 300 Total (C) 4500 Net Profit (B-C) 10400