Fulton Company was established at the beginning of 2019 when several investors paid a total of $200,000 to purchase Ful

[answerhappygod]

Fulton Company was established at the beginning of 2019 when several investors paid a
total of $200,000 to purchase Fulton common stock. No additional investments in common stock
were made during the year. By December 31, 2019, Fulton had cash on hand of $45,000, office
equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the
year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid
dividends of $25,000 to its stockholders during 2019.


1. Based on the information above, prepare a balance sheet for Fulton Company at December 31,
2019. In the process of preparing the balance sheet, you must calculate the ending balance in
retained earnings.
2. Prepare a statement of stockholders' equity for the year ended December 31, 2019.
3. What was the amount of Fulton's net income for 2019?
4. Was Fulton successful during its first year in operation? Explain your answer.
Answer:
1.
Fulton Company
Balance Sheet
At December 31, 2019
Assets
Cash $45,000
Accounts receivable 20,000
Inventories 156,000
Office equipment (net) 40,000
Total assets $261,000
Liabilities
Accounts payable $10,000
Stockholders' equity
Common stock $200,000
Retained earnings 51,000
Total stockholders' equity 251,000
Total liabilities and
stockholders' equity $261,000
2.
Fulton Company
Statement of Stockholders' Equity
For the Year Ended December 31, 2019
Common Stock
Retained
Earnings
Balance, January
1, 2019 $-0- $-0-
Issue common
stock 200,000
Net income 76,000*
Dividends to
stockholders (25,000)
Balance,
December 31,
2019
$200,000 $51,000
3. $76,000 (see statement of stockholders' equity above)
4. Yes, Fulton's first year was successful. The company earned net income whereas many new
companies have losses during early years of operations. Also, Fulton was able to pay dividends
to its stockholders. At the end of the first year, the company has just $10,000 in liabilities. It
appears to be in sound financial condition.
Difficulty: 3 Hard
Topic: Distinguish different financial statements
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).