Question

Ryan Hope, controller of Hope, Inc. provides you with the following information concerning all transactions during 2009. Hope, Inc. began operations on January 1, 2009.

1. Issued 1,000 shares of common stock at $95 per share.

2. Paid $2,600 every month to rent office and warehouse space. Rent was paid on the last day of each month.

3. Made total sales for services of $190,000: $65,000 for cash and $125,000 on account.

4. Purchased land for $32,000 in cash.

5. Borrowed $75,000 on December 31. The note payable matures in two years.

6. Salaries totaling $80,000 were paid during the year. Use a separate expense line for each expense – both on the worksheet and on your formatted income statement.

7. Other expenses totaling $40,000 were paid during the year.

8. $56,000 was received from customers to whom sales had been made on account. 9. Declared and paid a dividend of $26,000.

A) What is the amount of rent expense for the period of the income statement?

B) What is the net income?

C) What is the balance in the retained earnings account at the end of the period?

D) What is the total owners' equity at the end of the period?

E) What are the total assets at the end of the period?

F) What are the subtotal on the formatted Balance Sheet for Total Current Assets at the end of the period?

G) What is the ending balance for cash?

Answer 1

A)Rent expense for the periof = 2600*12 months =$ 31200

B)Total expense = 31200 rent +80000 salaries + 40000 other expense

= 151200

Net Income =sales - total expense

= 190000-151200

= 38800

c)Balance in retained earning =beginning +net income -dividend

= 0+38800-26000

= 12800

d)Total owners equity = capital investment +retained earning

= [1000*95] + 12800

= 95000+12800

= 107800

e)Total asset = Total liabilities +total equity

= 75000+107800

= 182800

f)Total current asset =Total asset - non current asset (land)

= 182800- 32000

= $ 150800

g)Accounts receivable at end=125000-56000=69000

cash =total current asset - accounts receivable

= 150800-69000

= 81800