Answers to Practice Problems chap002 (2)

Answers to Practice Problems chap002 (2) - Chapter 2...

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Chapter 2 Financial Statements and Accounting Concepts/Principles P2.13. a. BREANNA, INC. Income Statement For the Year Ended December 31, 2009 Sales ................................................................................................... $200,000 Cost of goods sold .............................................................................. (128,000) Gross profit ........................................................................................ $ 72,000 Selling, general, and administrative expenses .................................. (34,000) Earnings from operations (operating income) ................................... $ 38,000 Interest expense .................................................................................. (6,000) Earnings before taxes ......................................................................... $ 32,000 Income tax expense ............................................................................ (8,000) Net income ......................................................................................... $ 24,000 BREANNA, INC. Statement of Changes in Owners’ Equity For the Year Ended December 31, 2009 Paid-in capital: Common stock ...................................................................... $ 90,000 Retained earnings: Beginning balance .................................................................. $ 23,000 Net income for the year ......................................................... 24,000 Less: Dividends declared and paid during the year ............... (12,000) Ending balance ...................................................................... 35,000 Total owners’ equity . ............................................................. $125,000 BREANNA, INC. Balance Sheet December 31, 2009 Assets: Cash ....................................................................................... $ 65,000 Accounts receivable ............................................................... 10,000 Merchandise inventory ........................................................... 37,000 Total current assets ................................................................ $112,000 Equipment .............................................................................. 120,000 Less: Accumulated depreciation ............................................ (52,000) 68,000 Total assets ............................................................................. $180,000 Liabilities: Accounts payable ................................................................... $ 15,000 Long-term debt ....................................................................... 40,000 Total liabilities ....................................................................... $ 55,000 Owners’ Equity: Common stock ...................................................................... $ 90,000 Retained earnings .................................................................. 35,000 Total owners’ equity . ............................................................. $125,000 Total liabilities and owners’ equity ........................................ $180,000
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P2.16.
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