Question

Required Information The following information applies to the questions displayed below) Ken Young and Kim Sherwood organized Reader Direct as a corporation, each contributed $58,000 cash to start the business and received 4,000 shares of stock. 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, $53,500. amounts due from customers from sales of books, $28,800, equipment, $57000: amounts owed to publishers for books purchased $9,300; one year notes payable to a local bank for $5.700. No dividends were declared or paid to the stockholders during the year. Required: 1. Complete the following balance sheet at December 31, 2017 Answer is not complete. READER DIRECT Balance Sheet Cash 58.000 At December 31, 2017 Liabilities 53,500 Accounts Payable 28,800 Notes Payable 57.000 Total Liabilities Stockholders' Equity Common Stock 5.700 831700 Retained Earnings 3.300 Total Stockholders Equity Total Labises and Stockholders al Ass 130,300 72.000

Answer 1

In the question there is no net income given.

So, by preparing the Balance sheet, the balancing figure will be the retained earnings.

For question 2, the net income will be the same as Ending retained earnings computed in balance sheet.

For question 3, The ending balance of 2017 will be the Beginning balance of 2018.

For further solution, please go through the following attachment.

Assets Cash Accounts Receivable Equipment 1) Balance sheet Liabilities 53,500 Accounts Payable 9,300 28,800 Note Payable 5,700 57,000 Total Liabilities 15,000 Stockholder's Equity Common stock 1,16,000 58000* 2 Retained Earnings 8,300 This is the balancing figure 1,39,300 Total 1,39,300 Total Formula for retained earnings= Assets-liabilities- common stock = 139,300-15,000-116000=8,300 2) Computation of Net Income Formula = Ending Retained earnings + Dividend - Beginning Retained Earnings = 8,300 + 0 - 0 = 8,300 Enter this amounts in your table 8300 = 8300 + 0- 0 The net income will be same as ending retained earnings because there is no dividends paid or beginning retained earnings 3) Computation of Ending Retained earnings Formula = Beginning Retained Earnings + Net Income - Dividends Since Ending balance of 31 december 2017 will be beginning balance for 2018 = 8,300 + 7,500 - 3,900 = 11,900 Enter this amounts in your table 11900 = 8300 + 7500 - 3900