Question

Problem 1: Presented below is selected data related to Mike Corporation at December 31, 2020.

Mike reports financial information monthly.

Service Revenue                                $36,000                        Utilities Expense                      $4,000

Cash                                                          8,000                         Accounts Receivable                9,000   

Equipment                                            10,000                          Salaries and Wages Expense   7,000

Rent Expense                                         11,000                         Notes Payable                           16,500

Accounts payable                                    2,000                        Dividends                                       5,000

Instructions:

1. Determine the total assets of the firm
2. Determine the net income of the firm (Show Your Work)
3. Determine the stockholders’ equity of the firm (Show your work)
4. Determine the total liabilities of the firm

Answer 1

a. Total assets of the firm:

Cash	8,000.00
Equipments	10,000.00
Accounts Receivable	9,000.00
Total Assets	27,000.00

b. Net income of the firm:

Service Revenue	36,000.00
Less: Rent Expenses	11,000.00
Less: Utilities Expense	4,000.00
Less: Salaries and Wages Expense	7,000.00
Net Income	14,000.00

c. Stockholders’ equity of the firm :

Total Assets = Total Liabilities + Shareholders' Equity

Or, 27,000 = 23,500 + x

Or, 27,000 - 23,500 = x

Or, x = 3,500.

Therefore, Shareholders quity is 3,500.

d. Total Value of Liabilities:

Accounts payable	2,000.00
Notes Payable	16,500.00
Dividends	5,000.00
Total Liabilities	23,500.00