AEM 221 Financial Accounting
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:
Receivables from customers (all considered collectible)
Inventory of merchandise (based on physical count and priced at cost)
Equipment owned, at cost less used portion
Accounts payable owed to suppliers
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)
Total sales revenue
Expenses, including the cost of the merchandise sold (excluding income taxes)
Income taxes expense at 30% × pretax income; all paid during 2006
Contributed capital, 7,000 shares outstanding
Dividends declared or paid during 2006.
Prepare a summarized income statement for the year 2006.
Prepare a Statement of Retained Earnings for the year 2006.
Prepare a balance sheet at December 31, 2006.