Gary’s TV had the following accounts and amounts in its financial statements on
ID: 2431625 • Letter: G
Question
Gary’s TV had the following accounts and amounts in its financial statements on December 31, 2016. Assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year then ended.
Required:
a. Calculate the difference between current assets and current liabilities for Gary’s TV at December 31, 2016.
b. Calculate the total assets at December 31, 2016.
c. Calculate the earnings from operations (operating income) for the year ended December 31, 2016.
d. Calculate the net income (or loss) for the year ended December 31, 2016.
e. What was the average income tax rate for Gary’s TV for 2016?
f. If $425,360 of dividends had been declared and paid during the year, what was the January 1, 2016, balance of retained earnings?
Interest expense $ 31,000 Paid-in capital 82,000 Accumulated depreciation 31,000 Notes payable (long-term) 285,000 Rent expense 69,000 Merchandise inventory 839,000 Accounts receivable 189,000 Depreciation expense 11,000 Land 123,000 Retained earnings 427,640 Cash 136,000 Cost of goods sold 1,753,000 Equipment 63,000 Income tax expense 242,640 Accounts payable 93,000 Sales revenue 2,538,000Explanation / Answer
a. Calculation of the difference between current assets and current liabilities:
b. Calculation of Total Asssts:
c. Calculation of the earnings from operations (operating income) for the year ended December 31, 2016.
d. Calculation of the net income (or loss) for the year ended December 31, 2016
e. The average income tax rate:
Average Income Tax Rate = Income Tax Expense / (Operating Income - Interest Expense)
= 242,640 / ( 705,000 - 31,000)
= 242,640 / 674,000
Average Income Tax Rate = 0.36 or 36%
f. Retained earnings = Beginning balance + Net income - Dividends
427,640 = Beginning balance + 431,360 - 425,360
427,640 = Beginning balance + 6,000
Beginning balance = 427,640 - 6,000 = $421,640
Current Assets Merchandise Inventory 839,000 Account Receivable 189,000 Cash 136,000 Total 1,164,000 Current Liabilities Accounts Payable 93,000 Total 93,000 Difference 1,071,000Related Questions
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