Question

(TCOs B and D) The following items are taken from the financial statements of Lacey Company for 20xx: Advertising Expense $14,000 Accounts Receivable 12,000 Cost of Goods Sold 65,000 Accumulated Depreciation - Equipment 20,000 Accounts Payable 21,000 Cash 44,000 Depreciation Expense 17,000 Common Stock 100,000 Dividends 25,000 Insurance Expense 5,000 Note Payable (due prior year) 70,000 Rent Expense 4,000 Prepaid Insurance 17,000 Retained Earnings (beginning) 22,000 Salaries Expense 50,000 Salaries Payable 3,500 Net Sales 175,000 Supplies 4,000 Supplies Expense 3,000 Equipment 210,000 Instructions Calculate the net income. (18 points) Calculate the balance of Retained Earnings that would appear on a balance sheet on December 31, 20xx (current year). (7 points) Calculate the gross profit percentate. (5 points)

Answer 1

1
Net Sales		175000
Less: Cost of Goods Sold		65000
Gross Profit		110000
Less: Operating expenses
Advertising Expense	14000
Depreciation Expense	17000
Insurance Expense	5000
Rent Expense	4000
Salaries Expense	50000
Supplies Expense	3000
Total Operating expenses		93000
Net income		17000
2
Retained Earnings (beginning)	22000
Add: Net income	17000
Less: Dividends	-25000
Retained Earnings, December 31, 20xx	14000
3
Gross Profit	110000
Divide by Net sales	175000
Gross profit percentage	62.86%	(Rounded off)