Owners\' Equity Homework Problem 1 The following balances are from the Annie\'s

Question

Owners' Equity Homework Problem 1 The following balances are from the Annie's Accounting Company 2017 Cash Accounts Receivable Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Salaries Payable Taxes Payable Note Payable Common Stock (S.1 Par) Paid In Capital Retained Earnings Accounting Fees Salary Expense Rent Expense Interest Expense Depreciation Expense 10,000 40,000 6,000 180,000 50,000 40,000 10,000 20.000 50,000 3,000 190,000 60.000 70,000 5,000 70,000 100,000 500 4,5002.000 31,000 35,000 100,000 40,000 24,000 6,000 10,000 18,000 The common stock outstanding was 5,000 shares on January 1 and then 15,000 shares were sold on June 30. During 2017, the company paid a dividend of was sold during the year. The tax rate is 30% and 1 /2 of 2017 were paid in 2017 and the rest will be paid in 2018. The Note Payable requires an annual payment of $30,000 principal plus interest at 6% on December 31 of each year. (Note-this is a service company-no COGS No equipment For the year ended 2017 prepare a Balance Sheet, Income Statement, Statement of Owners' Equity and Statement of Cash Flows.

Explanation / Answer

Income Statement Accounting Fees $100,000 Less: Operating expenses Salary expenses 40000 Rent expenses 24000 Depreciation Expenses 10000 Total Operating expenses 74000 Operating income $26,000 Interest expenses 6000 Profut before tax $20,000 Income tax expenses 6000 Net Income $14,000 Sttaement of Owner Equity Beginning Common stock 2000 Paid in capital 18000 20000 Beg Retained Eranings 31000 Add: net In come $14,000 Less Dividend $10,000 35000 Ending Owner Equity 55000 Balance Sheet Assets Current Assets Cash 20000 Accounts Receivable 50000 Prepaid Rent 3000 Total Current Assets 73000 Preoperty Plant & equipment Equipment 190000 acc Dep 60000 130000 Total Current Assets 203000 Liabilities & stockholer Equity Current liabilities Accounts payable 70000 salaries payable 5000 Taxes payable 3000 Total nCurrent liabilities 78000 Notes payable 70000 Total liabilities 148000 Stockholder Equity 55000 Total Liabilities & stockholer Equity 203000 Statement of Cash flow Statement of cash flow Cash flows from operating activities Net Income $14,000 Adjustments to convert net income to cash basis Depreciation expenses   10000 Increase in Accounts receivable -10000 Decraese in Prepaid expenses 3000 Increase in Accounts Payable 30000 Increase in Income Tax payable         3,000 Decrease in salaries payable (5,000.00) 31000 Net cash from operating activities    45,000.00 Cash flows from investing activities Purchase of Equipment -10000 -10000 Net cash used investing activities (10,000.00) Cash flows from financing activities Repayment of Notes payable -30000 Issue of Common stock 15000 Payment of Dividends   -10000 (25,000.00) Net cash from financing activities (25,000.00) Net Increase in cash and cash equivalents 10,000.00 Cash and cash equivalents at beginning of period 10,000.00 Ending Balance     20,000.00

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