[Carriemay123]

This homework problem is killing me. I've been at it for days and it's due at midnight tonight... 2 1/2 hours. I need to find the difference between the current assets and current liabilities. Then, I need to find the total assets and net income or loss. GRRRR> Please help!

Here's the info given to me.

Assume all figures are from the Balance Sheet and Income statement ending 12/31/09

Interest expense- 36,000
Paid-in Capital- 80,000
Accumulated depreciation- 24,000
Notes Payable (long term)- 280,000
Rent expense- 72,000
Merchandise inventory 840,000
Accounts receivable 192,000
Depreciation expense 12,000
Land 128,000
Retained earnings 900,000
Cash 144,000
Cost of goods sold 1,760,000
Equipment 72,000
Income tax expense 240,000
Accounts payable 92,000
Sales revenue 2,480,000

Please help!!

[ROLCAM]

The first thing you need to do is to classify
each item into the following:-

1) Profit and Loss Item. = P
2) Balance Sheet Item. = B

##############################

1) Interest expense- 36,000 = P
2) Paid-in Capital- 80,000 = B
3) accumulated depreciation- 24,000 = B
4) Notes Payable (long term)- 280,000 = B
5) rent expense- 72,000 = P
6) merchandise inventory 840,000 = B
7) accounts receivable 192,000 = B
8) depreciation expense 12,000 = P
9) land 128,000 = B
10) retained earnings 900,000 = B
11) cash 144,000 = B
12) cost of goods sold 1,760,000 = P
13) equipment 72,000 = B
14) income tax expense 240,000 = P
15) accounts payable 92,000 = B
16) sales revenue 2,480,000 = P

##############################

PROFIT AND LOSS ACCOUNT FOR THE PERIOD.

16) sales revenue 2,480,000 = P
LESS
12) cost of goods sold 1,760,000 = P

A) gross margin = 720,000

LESS

1) Interest expense- 36,000 = P
5) rent expense- 72,000 = P
8) depreciation expense 12,000 = P

B net profit before tax = 612,000

LESS

14) income tax expense 240,000 = P

C net profit after tax = 372,000.

##############################

At this stage you must classify the balance sheet items as follows:-

1) Fixed Asset
2) Current Asset
3) Long Term Liabilities
4) Current Liabilities.
5) Equity.

FA + CA = LTL + CL + E

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BALANCE SHEET AS AT THE END OF PERIOD.

FIXED ASSETS

9) land 128,000 = B**FA
13) equipment 72,000 = B **FA
3) accumulated depreciation- (24,000) = B*FA

FIXED ASSETS TOTAL = 176,000

CURRENT ASSETS

11) cash 144,000 = B**CA
7) accounts receivable 192,000 = B**CA
6) merchandise inventory 840,000 = B**CA

TOTAL CURRENT ASSETS= 1,176,000

TOTAL ASSETS = 1,352,000

LONG TERM LIABILITIES

4) Notes Payable (long term)- 280,000 = B**LTL

TOTAL LONG TERM LIABILITIES = 280,000

CURRENT LIABILITIES

15) accounts payable 92,000 = B**CL

TOTAL CURRENT LIABILITIES = 92,000

TOTAL LIABILITIES = 372,000

NET ASSETS = 980,000

EQUITY

2) Paid-in Capital- 80,000 = B**E
10) retained earnings 900,000 = B**E


TOTAL EQUITY = 980,000.

##############################

From the above, it is now very easy
to answer all the questions required.

All the very best.

Please acknowledge.

[irfanqazi]

I have a small doubt regarding 12) cost of goods sold 1,760,000 = P. Is this not supposed to be under Balance Sheet Item?

[ROLCAM]

12) cost of goods sold is definitely a Profit and Loss item.

The make up of it is PURCHASES,
Plus taking into account the opening and closing balances of
Stock in hand.

[rajaguru]

Difference between current asset and current liabilities