1. Prepare a Statement of Retained Earnings for the year ended 2017 .

2. Prepare a Classified Balance Sheet dated December 31, 2017.

3. Prepare a Statement of Cash Flows by the indirect method for the year ended in 2017

Current assets

Cash $18,000

Negotiable Securities (Short Term) 2,000

Accounts receivable 14,000

Reserve for Insolvency (2,000)

Inventory 15,000

Prepaid Insurance 5,000

Total current assets $52,000

Property, plant and equipment

Land $30,000

Building 150,000

Department Accumulated – Building (45,000)

Team 100,000

Accumulated Dep. - Equipment (20,000)

Total Personal Protective Equipment $215,000

Total assets $267,000

current liabilities

Accounts payable $9,000

Unearned income 3,000

Income Taxes Payable 3,000

Total current liabilities $15,000

Long term passives

Bonds, 10%, due 2021 $100,000

Equity

Common Stock $50,000

(100,000 authorized, 50,000 issued) cont.

Pd.-in Additional Capital 80,000

Retained earnings not provided (must be calculated)

Total Equity $152,000

Total liabilities and equity $267,000

Additional information (for all entries):

Sales for 2017 are $250,000. All sales are on credit.

Gross Margin/Profit ratio is 40 percent

Accounts receivable:

i.$180,000 of receivables are paid at the end of the year (the remaining balance remains on the balance sheet).

ii. $3,000 of A/R is paid off during the year.

iii.5% of the Accounts Receivable (after write-offs and collections) is considered uncollectible.

Inventory:

i. Purchased inventory is $175,000, all on credit (periodic method used).

ii. All accounts payable come from inventory purchases; all but $12,000 of the purchased inventory is paid for at the end of the year.

The additional equipment is purchased on 4/1/17 for $20,000 cash. All equipment, when new, including new purchase, has a useful life of five years, has no salvage value, and is depreciated using the straight-line method.

The building depreciates at $5,000 per year.

Half of the marketable securities sold for $1,300. The FMV of the other half of the securities is also $1,300 and an FMV adjustment is required.

Salaries are $2,100 per month (expenses for 12 months of salaries must be recorded). Half a month is expected to be due on 12/31/17 due to payday falling (so 11.5 months of wages have been paid and employees are still owed half a month at the end of the year).

$60,000 in cash is borrowed on 10/31/17 by issuing a promissory note. The interest is 8% per year.

The bonds were sold at face value last December and pay interest on December 31, 2017.

An additional 10,000 shares were sold at $4 per share (for EPS purposes, assume these shares were outstanding all year).

Insurance was purchased for $20,000 on 7/1/17 (the same time the policy purchased in 2016 expired. The new policy was for 12 months).

On December 31, 2017, 1,000 shares are repurchased from the market at $2.80/share (treasury shares).

The tax rate is 30 percent. Current year income taxes are due and therefore paid during the first two months of the next year (you will need to complete an entry to pay 2016 taxes, however 2017 taxes will not be paid until end of January 2018).

During 2017, dividends of $4,000 were paid.

Unearned income has been earned during the year (classified as other income in the multi-step income statement).

Answer rating: 100% (QA)

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