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Problem 1-1: Preparing an Income Statement, Statement of Retained Earnings, and Balance Sheet
Problem 1-1: Preparing an Income Statement, Statement of Retained Earnings, and Balance Sheet
At the end of its first year of operations (December 31, 2012), the Acme Company released the financial data shown in the chart below:
Problem 1-1: Acme Company Financial Data
| Accounts | Amount |
|---|---|
| Cash. | $25,000 |
| Receivables from customers (no allowance for doubtful accounts is needed). | $20,300 |
| Inventory of merchandise. | $81,000 |
| Equipment owned, at cost of $60,700 net of A/depreciation of $20,000. | $40,700 |
| Accounts payable owed to supplies. | $66,140 |
| Salary payable for 2012 (to be paid on January 4, 2013). | $1,800 |
| Total sales revenue. | $126,000 |
| Operating expenses, including the cost of the merchandise sold. | $80,200 |
| Income taxes expense at 30% of pretax income; all paid during 2012. | ? |
| Contributed capital 10,000 shares outstanding. | $87,000 |
| Dividends declared and paid during 2012. | $20,000 |
Using knowledge from prior courses, work experience, textbooks, or Internet sources, as well as the financial data provided in the chart above, prepare the following financial statements for the Acme Company:
- Summarized Income statement for the year 2012.
- Statement of retained earnings for the year 2012.
- Balance sheet at December 31, 2012.
- Prepare Liquidity Ratios and explain what those ratios tell us.
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