Understanding Financial Accounting 3rd Canadian Edition by Christopher D. Burnley test bank

         Income tax expense                     5,250         Cost of goods sold                                        59,000
         Sales revenue                            105,550         Retained earnings (as of January 1)      80,450
         Inventory                                      31,500         Bank Loan payable                                      50,750
         Accounts payable                       32,750         Equipment                                                   125,000
         Operating expenses                   28,900         Dividends paid                                                5,250
         Interest expense                           3,600         Accounts Receivable                                   11,250
         Prepaid expenses                          1,250
 
Instructions
a)     Determine the gross profit and net income.
b)     Calculate the balance in the retained earnings account as of December 31.
c)     Calculate the working capital.
 
Solution (18 min.)
Gross profit = $105,550 – 59,000 = $46,550
         Net Income = $46,550 – 28,900 – 3,600 – 5,250 = $8,800
 
Balance in R/E account: $80,450 + $8,800 – $5,250 = $84,000
 
Current Assets = $13,500 + 11,250 + 31,500 + 1,250 = $57,500
         Current Liabilities = $32,750
         Working Capital: $57,500 – $32,750 = $24,750
 
Bloomcode: Analysis
Difficulty: Hard
Learning Objective: Identify and explain the content and reporting objectives of the four basic financial statements and the notes to the financial statements.
CPA: Financial Reporting
AACSB: Analytic
 
 

 
MATCHING
 
 
94. Match each of the following activities to the transactions listed below by placing the appropriate letter in the space provided.
ACTIVITIES
a)     Operating
b)     Investing
c)     Financing
 
___       1.         Borrowing money
 
___       2.         Payment of salaries and wages