Diablo Chemicals Inc. buys and sells specialty chemicals The condensed Balance Sheet of Diablo Chemicals Inc.,...

  

Transcribed Image Text:

Diablo Chemicals Inc. buys and sells specialty chemicals The condensed Balance Sheet of Diablo Chemicals Inc., as of December 31, 2021, is provided below: Assets Cash. Accounts Receivable Office Supplies. Inventory Equipment DIABLO CHEMICALS, INC Balance Sheet December 31, 2021 Total assets Liabilities $106,750 Accounts payable.. 12,435 Total liabilities. 1,500 28,100 33,965 Footnote to the Income statement: Total equity. Total liabilities and equity. The condensed Income Statement for the year ending December 31, 2021, is provided below: $182,750 Sales revenue. Cost of goods sold. Gross Profit Selling & Administrative expenses. Income before taxes Income tax expense Net income Equity Common stock Retained earnings.. DIABLO CHEMICALS, INC Income Statement For the Year Ended December 31, 2021 $38.400 38,400 98,000 46,350 144,350 $182,750 $77,000 (36,200) $40,800 (18,900) $21,900 (4,599) $17.301 Selling & Administrative expenses included office supplies expenses, salaries for sales and admin staff, utilities for the office building, rent for the sales office in Tacoma, and depreciation expense for office equipment. The following transactions occurred during 2022: i. ii. iii. iv. V. vi. vii. viii. ix. X. xi. On March 1, the firm signed an 8% three-year note payable for $20,000 xii. On April 1, the firm purchased $15,000 worth of office equipment for cash. The office equipment is expected to have a 5-year life and a salvage value of $5,000. On June 30, the firm prepaid rent for two years in cash $24,000. The rent was for the sales office in Tacoma Shareholders invested $75,000 in exchange for 3,000 shares of common stock. The firm purchased $17,000 worth of raw material inventory for $12,700 cash, the balance to be paid later The company incurred the following expenses (all paid in cash) during the year Salaries for sales and admin staff Utilities for office building The company paid 35,800 to its suppliers of chemicals The firm purchased office supplies for $2,100 cash. Sales for the year was $98,700, of which $27,300 was collected in cash. The company received $5,000 from its customers The company received $7,500 as prepayment (Advance from Customers) for goods to be delivered later 13,490 4,810 The company declared and paid $15,000 in dividends The following adjusting entries need to be booked on December 31, 2022: a) Refer to transaction (ii). Depreciation expense for the office equipment. Depreciation expenses for other equipment for the year amounted to $3,960. b) Refer to transaction (iii). Book the rent expense for 2022. The rent expense was for the sales office in Tacoma. c) Refer to transaction (i). Book the entry for the interest accrued on the note payable. d) Refer to transaction (xi). The warehouse reported that they had shipped on December 15, goods with the sales price of $4,500 to the customer that had prepaid e) The balances in the following inventory accounts on December 31, 2022, was: Office supplies Inventory $2,800 $9,600 Book the necessary entries f) On December 1, 2022, Diablo Chemical Inc. signed an employment contract with a new CEO for an annual salary of $20,000. The new CEO will begin working on April 1, 2023. Required: 1) Enter the appropriate Beginning Balances in the Expanded Accounting Equation 2) Examine the effect of each transaction on the expanded accounting equation. Round up/down the dollar amounts (for instance, 1,666.66 becomes 1,667, and 1,666.33 becomes 1,666) 3) Total all the columns 4) Complete the Statement of Retained Earnings in Excel 5) Complete the Statement of Cash Flows in Excel using the Direct Method 6) Comment on the difference between the Net Income and Cash Flow from Operations for the year. Suppose you are a banker at the local branch of Keystone Bank. On April 15 of 2023, Diablo Chemicals' CFO has approached you for a loan of $50,000. As a banker what questions would you ask the CFO? Would you give the loan? Why? Diablo Chemicals Inc. buys and sells specialty chemicals The condensed Balance Sheet of Diablo Chemicals Inc., as of December 31, 2021, is provided below: Assets Cash. Accounts Receivable Office Supplies. Inventory Equipment DIABLO CHEMICALS, INC Balance Sheet December 31, 2021 Total assets Liabilities $106,750 Accounts payable.. 12,435 Total liabilities. 1,500 28,100 33,965 Footnote to the Income statement: Total equity. Total liabilities and equity. The condensed Income Statement for the year ending December 31, 2021, is provided below: $182,750 Sales revenue. Cost of goods sold. Gross Profit Selling & Administrative expenses. Income before taxes Income tax expense Net income Equity Common stock Retained earnings.. DIABLO CHEMICALS, INC Income Statement For the Year Ended December 31, 2021 $38.400 38,400 98,000 46,350 144,350 $182,750 $77,000 (36,200) $40,800 (18,900) $21,900 (4,599) $17.301 Selling & Administrative expenses included office supplies expenses, salaries for sales and admin staff, utilities for the office building, rent for the sales office in Tacoma, and depreciation expense for office equipment. The following transactions occurred during 2022: i. ii. iii. iv. V. vi. vii. viii. ix. X. xi. On March 1, the firm signed an 8% three-year note payable for $20,000 xii. On April 1, the firm purchased $15,000 worth of office equipment for cash. The office equipment is expected to have a 5-year life and a salvage value of $5,000. On June 30, the firm prepaid rent for two years in cash $24,000. The rent was for the sales office in Tacoma Shareholders invested $75,000 in exchange for 3,000 shares of common stock. The firm purchased $17,000 worth of raw material inventory for $12,700 cash, the balance to be paid later The company incurred the following expenses (all paid in cash) during the year Salaries for sales and admin staff Utilities for office building The company paid 35,800 to its suppliers of chemicals The firm purchased office supplies for $2,100 cash. Sales for the year was $98,700, of which $27,300 was collected in cash. The company received $5,000 from its customers The company received $7,500 as prepayment (Advance from Customers) for goods to be delivered later 13,490 4,810 The company declared and paid $15,000 in dividends The following adjusting entries need to be booked on December 31, 2022: a) Refer to transaction (ii). Depreciation expense for the office equipment. Depreciation expenses for other equipment for the year amounted to $3,960. b) Refer to transaction (iii). Book the rent expense for 2022. The rent expense was for the sales office in Tacoma. c) Refer to transaction (i). Book the entry for the interest accrued on the note payable. d) Refer to transaction (xi). The warehouse reported that they had shipped on December 15, goods with the sales price of $4,500 to the customer that had prepaid e) The balances in the following inventory accounts on December 31, 2022, was: Office supplies Inventory $2,800 $9,600 Book the necessary entries f) On December 1, 2022, Diablo Chemical Inc. signed an employment contract with a new CEO for an annual salary of $20,000. The new CEO will begin working on April 1, 2023. Required: 1) Enter the appropriate Beginning Balances in the Expanded Accounting Equation 2) Examine the effect of each transaction on the expanded accounting equation. Round up/down the dollar amounts (for instance, 1,666.66 becomes 1,667, and 1,666.33 becomes 1,666) 3) Total all the columns 4) Complete the Statement of Retained Earnings in Excel 5) Complete the Statement of Cash Flows in Excel using the Direct Method 6) Comment on the difference between the Net Income and Cash Flow from Operations for the year. Suppose you are a banker at the local branch of Keystone Bank. On April 15 of 2023, Diablo Chemicals' CFO has approached you for a loan of $50,000. As a banker what questions would you ask the CFO? Would you give the loan? Why?

Answer rating: 100% (QA)

To provide a comprehensive answer to your request I will break down the steps and address each requirement separately Beginning Balances in the Expanded Accounting Equation The expanded accounting equ... View the full answer