Question

Assume the November transactions for Camindo Co. are as follows:

Answer 1

Answer:

1.                                     Surry Co.

                                 Income Statement

                    For the Year Ended December 31, 2016

Sales                                                                $915,000

Less: Sales retiurns and allowances              $55,000

Net Sales                                                         $860,000

Cost of merchandise sold                              $670,000

Gross profit                                                      $190,000

Less: Administrative expenses    $30,000  

Selling expenses                           $120,000  $150,000

Operating Profit                                               $40,000

Other Income and expenses

Rent revenue                                                    $19,000

                                                                          $59,000

Less: Interest expense                                     $12,000

Net Profit                                                           $47,000

2)  Total assets = Accounts receivable + Cash + equipment = $10000 + $25,300 + $16,800

Total assets = $52,100

3) Total assets = Total Liabilities + Stockholders' equity

$45,000 = $18,000 + Stockholders' equity

Stockholders' Equity = $45,000 - $18,000

Stockholders' Equity = $27,000

Note: retained earning is part of the stock holders' equity

4) The summary of the cash receipts and cash payments for a specific period of time is a(n) is Statement of Cash Flows

5) Increase in total assets = Increase in total liabilities + Increase in stockholders’ equity

$80,000 = $60,000 + (Increase in common stock + increase in retained earnings)

$80,000 = $60,000 + ($8000 + Increase in retained earnings)

Increase in retained earnings = $80,000 - $60,000 - $8,000

Increase in retained earnings = $12,000

As no dividend has been paid,  Increase in net income of Trinder = Increase in retained earnings = $12,000

6) Cost principle

It initially records assets in the accounting records at their purchase price.

7) Total assets will exceed total liabilities and stockholders' equity by $40,000.

For the error, cash on the asset side will increase by $20000 and the retained earnings will decrease by $20000 from their current balances. The asset side will exceed the total of the liability and equity side by $20,000 - ($20,000) = $40,000