Saferoad corporation-create indirect cash flow


Problem:

Saferoad Corporation has completed its comparative balance sheet and income statement at year-end 2009. Additional information:

- A payment of 57,500 was made on the loan principal during the year.
- Just before year-end, a dividend was distributed to stockholders.
- A parcel of land was acquired early in the year.
- New shares of common stock were sold during the year.

Comparative Balance Sheet    31-Dec

                                           2009           2008
Cash                                  $1,090        $4,000
Accounts receivable             $2,910        $6,150
Inventory                            $4,800        $3,880
Prepaid advertising                 $700         $1,775
Buildings and furnishings      $40,000      $40,000
Accumulated depreciation    ($10,000)    ($8,000)
Land                                   $27,000      $15,000
TOTAL ASSETS                    $66,500      $62,805
Rent payable                         $2,000        $4,000
Taxes payable                       $1,900        $1,500
Wages payable                      $3,300        $2,200
Loan payable, long-term        $19,600      $26,805
Common stock                      $31,000     $25,000
Retained earnings                   $8,700       $3,300

TOTAL LIABILITIES AND EQUITY $66,500    $66,500 $62,805

Income Statement for 2009
Sales Revenue    $350,000
Cost of goods sold    $250,600
Gross profit    $99,400
Operating expenses:
Advertising    $9,500
Depreciation    $2,000
Insurance    $4,100
Rent    $28,900
Wages    $40,450
Operating income    $14,450
Interest expense    $1,600
Income before tax    $12,850
Taxes    $3,850
Net Income    $9,000

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Accounting Basics: Saferoad corporation-create indirect cash flow
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