Chapter_1_HW_Solution_final - AEM 221 Financial Accounting...

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AEM 221 Financial Accounting Spring 2007 Chapter 1 Homework Solution P1-1 Preparing an Income Statement, Statement of Retained Earnings, and Balance Sheet Assume that you are the president of Propane Company. At the end of the first year (December 31, 2006) of operations, the following financial data for the company are available: Cash $ 22,500 Receivables from customers (all considered collectible) 10,800 Inventory of merchandise (based on physical count and priced at cost) 81,000 Equipment owned, at cost less used portion 40,500 Accounts payable owed to suppliers 42,633 Salary payable for 2006 (on December 31, 2006, this was owed to an employee who was away because of an emergency; will return around January 10, 2007, at which time the payment will be made) 1,800 Total sales revenue 126,000 Expenses, including the cost of the merchandise sold (excluding income taxes) 80,190 Income taxes expense at 30% × pretax income; all paid during 2006 ? Contributed capital, 7,000 shares outstanding 86,350 Dividends declared or paid during 2006. 8,050 Required: 1. Prepare a summarized income statement for the year 2006. 2. Prepare a Statement of Retained Earnings for the year 2006. 3. Prepare a balance sheet at December 31, 2006. 1. Propane Company 1
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Income Statement For Year Ended December 31, 2006 Total sales revenue $ 126,000 Total expenses 80,190 Pretax income 45,810 Income tax expense 13,743
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