Problem:
Tomas Corporation began operations at the start of 20C. During the year, it made sales totaling $875,000 and collected $850,000 in cash from its customers. It purchased inventory costing $460,000, paid $20,000 for dividends and the cost of goods sold was $430,000. In addition, the corporation incurred the following expenses:
- Salary Expense $120,000
- Interest Expense 10,000
- Insurance Expense 8,000
- Supplies Expense 12,000
- Income Tax Expense 60,000
Required:
Question 1: Prepare an income statement showing revenues, expenses, pretax income, income tax expense, and net income for the year ended December 31, 20C.
Question 2: Based on the above information, what is the amount of accounts receivable on the balance sheet prepared at the end of 20C? (Hint: Use a T-account)
Question 3: Based on the above information, what is the amount of retained earnings on the balance sheet prepared at the end of 20C? (Hint: Use a T-account)
Note: Be sure to show how you arrived at your answer.