Question

Page S of 6 ProblemS At the beginning of a year, a businessman opens up a small company and invests $13,000 cash as capital in it, he purchases equipment for a sotal cost of S&h by paying from that cash: he borrows $3000 from the bank (all at the beginning of the year) During the year the compuy spends 4.000 in labor and raw materials for production, which returns $1500 of the loan to the bank is repaid. Present the balance sheet at a) The beginning of the year b) The end of the year c) How much net income did the small company earn? revenues of $,000. Then

Answer 1

a) Total cash for the beginning = (Capital - Equipment purchase + Borrowing )

( $13000 - $8000 + 3000) = $8000

Beginning balance sheet
Liability	Amount ($)	Assets	Amount ($)
Capital	$13,000	Equipment	$8,000
Borrowings	$3,000	Cash	$8,000
Total	$16,000	Total	$16,000

b)

Cash = ( Opening balance - Labor expenditure + Revenue receipt - Loan repaid)

( $8000 - $4000 + $5000 - $1500) = $7500

Balance sheet at the end
Liability	Amount ($)	Assets	Amount ($)
Capital	$13,000	Equipment	$8,000
Retained profit	$1,000	Cash	$7,500
Borrowings	$1,500
Total	$15,500	Total	$15,500

c) Net income = Revenue receipts - Labor expenses

= ($5000 - $4000) = $1000.