ACCT-UB 1 Lecture 8: Practice Problem (A)(B)
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expenses are overstated and assets are overstated expenses are understated and owners' equity is overstated net income is overstated and owners' equity isunderstated |
$91,550 $88,150 $87,200 |
It represents the wear and tear from use and from the effects ofweather It occurs when the asset is no longer able to provide services atthe level for which it was intended. It represents the decline in market value of an asset. |
$15,000 $3,750 $6,500 |
Yes, Yes, Yes, Yes Yes, No, No, Yes No, Yes, Yes, No |
$15,000 $12,500 Cannot be determined from the information given |
decrease in Delivery Truck for $11,500 increase in a loss for $6,500 increase in a gain for $6,500 |
$1,875,000 $3,750,000 $2,500,000 |
increase in research and development expense for $670,000 decrease in Patent for $83,750 increase in Accumulated Amortization for $670,000 |
must be shown on the face of the balance sheet by class of fixedasset. are normally shown under the caption of property, plant andequipment must be shown on the face of the balance sheet by class of fixedasset and are shown at their book value or at their fair marketvalue, whichever is lower. |
Prepare an Income Statement, Balance Sheet, and Statement of Changes in Shareholder's Equity. Analyze the results. The following information was obtained from the records of Shae, Inc.:
Merchandise Inventory | $132,000 |
Notes Payable, long term | $150,000 |
Sales | $450,000 |
Buildings and Equipment | $252,000 |
Selling, general, and administrative expenses | $36,000 |
Accounts Receivable | $60,000 |
Common Stock (21,000 shares) | $105,000 |
Income tax expense | $42,000 |
Cash | $96,000 |
Retained Earnings, 1/1/13 | $64,500 |
Accrued Liabilities | $9,000 |
Cost of Goods Sold | $270,000 |
Accumulated Depreciation | $108,000 |
Interest Expense | $24,000 |
Accounts Payable | $45,000 |
Dividends declared and paid during 2013 | $19,500 |
Except as otherwise indicates, 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 ended December 31, 2013. There were no changes in paid-in capital during the year.
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Required:
a. Prepare an Income Statement and Statement of Changes in Shareholder's Equity for the year ended December 31, 2013, and a Balance Sheet at December 31, 2013, for Shae, Inc.
Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.
b. What is the company's average income tax rate?
c. What interest rate is charged on long-term debt?
d. What is the ar value per share of common stock?
e. What proportion of the company's earnings is used for dividends?Â