Response:
1. Surry Co.
Income Statement
For the Year Ending December 31, 2016
Sales $915,000
Less: Sales returns 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 = $10,000 + $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 earnings form part of stockholders' equity
4) The cash receipts and cash payments overview for a certain time frame is referred to as a 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 + ($8,000 + Increase in retained earnings)
Increase in retained earnings = $80,000 - $60,000 - $8,000 Increase in retained earnings = $12,000
As there have been no dividends issued, the increase in Trinder's net income equals the increase in retained earnings, which is $12,000
6)
Cost principleIt records assets in the accounting system initially at their acquisition cost.
7) The total assets will surpass total liabilities and equity by $40,000.
Regarding the discrepancy, the cash on the asset side will rise by $20,000 while the retained earnings will fall by $20,000 from their existing amounts. The asset side will outpace the aggregate of liabilities and equity by $20,000 - ($20,000) = $40,000
