Pope's Garage had the following accounts and amounts in its financial statements on December 31, 2013. Assume that all

Question

Pope's Garage had the following accounts and amounts in its financial statements on December 31, 2013. Assume that all balance sheet items reflect account balances at December 31, 2013, and that all income statement items reflect activities that occurred during the year then ended. Accounts receivable $31,200 Depreciation expense 10,300 Land 25,900 Cost of goods sold 89,500 Retained earnings 64,200 Cash 11,600 Equipment 68,000 Supplies 5,800 Accounts payable 20,300 Service revenue 23,600 Interest expense 1,200 Common stock 8,000 Income tax expense 18,720 Accumulated depredation 42,000 Long-term debt 36,000 Supplies expense 13,600 Merchandise inventory 28,000 Sales revenue 169,000 Required: a. Calculate the total current assets at December 31, 2013. b. What was the average income tax rate for Pope's Garage for 2013? c. If $19,000 of dividends had been declared and paid during the year, what was the January 1, 2013, balance of retained earnings?

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a. Total current assets at December 31, 2013 are as follows: Accounts receivable 31,200 Cash 11,600 Supplies 5,800 Merchandise inventory 28,000 Total current assets 76,600 b. Average income tax rate for Pope's Garage for 2013 is computed as follows: Income tax expense 18,720 Divide by Net Income: Service revenue 23,600 Sales revenue 169,000 Less: Cost of goods sold 89,500 Gross margin 103,100 Less: Expenses Depreciation expense 10,300 Interest expense 1,200 Supplies expense 13,600 Total Expense 25,100 Net Income 78,000 Average income tax rate 24% c. Beginning retained earnings can be computed using the basic accounting equation of Assets = Liabilities + Equity Total current assets 76,600 Noncurrent assets: Land 25,900 Equipment 68,000 Less: Accumulated depredation 42,000 Total noncurrent assets 51,900 Total Assets 128,500 Less: Liabilities + Common stock Accounts payable 20,300 Long-term debt 36,000 Common stock 8,000 Total Liabilities and Common stock 64,300 Retained earnings, Dec. 31 64,200 Less: Net Income after tax (78,000 - 18,720) 59,280 Add: Dividends 19,000 Retained earnings, Jan. 1 23,920

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Pope's Garage had the following accounts and amounts in its financial statements on December 31, 2013

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Archived Solution

Accounts receivable	$31,200
Depreciation expense	10,300
Land	25,900
Cost of goods sold	89,500
Retained earnings	64,200
Cash	11,600
Equipment	68,000
Supplies	5,800
Accounts payable	20,300
Service revenue	23,600
Interest expense	1,200
Common stock	8,000
Income tax expense	18,720
Accumulated depredation	42,000
Long-term debt	36,000
Supplies expense	13,600
Merchandise inventory	28,000
Sales revenue	169,000

Accounts receivable	31,200
Cash	11,600
Supplies	5,800
Merchandise inventory	28,000
Total current assets	76,600

Income tax expense	18,720
Divide by Net Income:
Service revenue	23,600
Sales revenue	169,000
Less: Cost of goods sold	89,500
Gross margin	103,100
Less: Expenses
Depreciation expense	10,300
Interest expense	1,200
Supplies expense	13,600
Total Expense	25,100

Net Income	78,000

Average income tax rate	24%

Total current assets	76,600
Noncurrent assets:
Land	25,900
Equipment	68,000
Less: Accumulated depredation	42,000
Total noncurrent assets	51,900

Total Assets	128,500
Less: Liabilities + Common stock
Accounts payable	20,300
Long-term debt	36,000
Common stock	8,000
Total Liabilities and Common stock	64,300

Retained earnings, Dec. 31	64,200
Less: Net Income after tax (78,000 - 18,720)	59,280
Add: Dividends	19,000
Retained earnings, Jan. 1	23,920