## Answers

Answer :

**1. Income Statement**

Particulars | Amount (in $) | Amount (in $) |

Revenues : | ||

Sales | 500,000 | |

Less : Sales returns and allowances | (15,000) | |

Sales discounts | (6,000) | |

Net Sales | 479,000 | |

Interest revenue | 3,000 | |

Expenses : | ||

Cost of goods sold | 285,000 | |

Salaries expense | 40,000 | |

Rent expense | 16,000 | |

Depreciation expense | 12,000 | |

Advertising expense | 11,000 | |

Supplies expense | 6,000 | |

Insurance expense | 4,000 | |

Interest expense | 1,000 | |

Income tax expense | 12,000 | |

Total expense | (387,000) | |

Net Income | 95,000 |

**2. Balance Sheet**

Amount (in $) | |

ASSETS | |

Current Assets | |

Cash | 10,000 |

Accounts receivable 17,000 | |

Less : Allowance for doubtful accounts 2,000 | 15,000 |

Inventory | 20,000 |

Prepaid expenses | 2,000 |

Investment | |

Long term investments | 100,000 |

Long term assets | |

Building 300,000 | |

Less : Accumulated depreciation 30,000 | 270,000 |

Equipment 75,000 | |

Less : Accumulated depreciation 15,000 | 60,000 |

TOTAL ASSETS | 477,000 |

LIABILITIES AND SHAREHOLDERS' EQUITY | |

Current liabilities | |

Accounts payable | 8,000 |

Salaries payable | 3,500 |

Interest payable | 1,500 |

Income tax payable | 12,000 |

Unearned revenue | 5,000 |

Current portion of bank loan payable | 3,500 |

Long term liabilities | |

Bank loan payable | 35,000 |

Shareholders' equity | |

Common shares | 100 |

Retained earnings (Note) | 408,400 |

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 477,000 |

Note :

Retained earnings = Beginning retained earnings + Net Income - Dividend declared

= $329,400 + $95,000 - $16,000

= $408,400

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