The following account balances were taken from ABC Company\'s 2008 balance sheet
ID: 2379460 • Letter: T
Question
The following account balances were taken from ABC Company's 2008 balance sheets:
January 1, 2008 December 31, 2008
Accounts payable ? 50,000 Accounts receivable ? 82,000 Cash 35,000 38,000 Common stock 105,000 135,000 Inventory 70,000 ? Income taxes payable 17,000 ? Land 130,000 190,000 Retained earnings ? 162,000 Short-term notes payable 45,000 40,000
The following information was taken from ABC Company's 2008 income statement:
Total revenues 500,000 Total expenses <430,000> Net income 70,000 The following information was taken from ABC Company's 2008 statement of cash flows:
Net cash flow from operating activities 93,000 Net cash flow from investing activities <60,000> Net cash flow from financing activities <30,000> Net change in cash 3,000 Calculate the balance in the retained earnings account at January 1, 2008. Do not use decimals in your answer.
Explanation / Answer
1. Total equity at December 31, 2008 is equal to 80% of total liabilities at December 31, 2008.
(26,000 + 65,000 + 94,000) x 80% = 148,000 total equity
Calculate the balance in the common stock account at December 31, 2008.
148,000 - Retained Earnings = Common Stock
Retained Earnings $40,000 (at January 1, 2008)
Sales Revenue $97,000
Interest Revenue $11,000
Less:
Cost of Goods Sold $50,000
Salaries Expense $31,000
Income Tax Expense $10,000
= Retained Earnings $57,000 (at December 31, 2008)
148,000 = 57,000 = 91,000 Common Stock