Rose Corporation began operations on January 2, 2019. During 2019, Rose made cash and credit sales totaling $500,000 an

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Rose Corporation began operations on January 2, 2019. During 2019, Rose made cash and credit sales totaling $500,000 an

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Rose Corporation began operations on January 2, 2019. During 2019, Rose made cash and
credit sales totaling $500,000 and collected $420,000 in cash from its customers. Rose purchased
inventory costing $250,000, paid $15,000 for dividends and the cost of goods sold was $210,000.
Also, the corporation incurred the following expenses during 2019:

Salary expense $80,000
Interest expense 5,000
Insurance expense 4,000
Supplies expense 6,000
Income tax expense 34,000
1. Prepare an income statement showing revenues, expenses, income before income taxes,
income tax expense, and net income for the year ended December 31, 2019.
2. Based on the above information, what is the amount of accounts receivable on the balance
sheet prepared as of December 31, 2019?
3. Based on the above information, what is the amount of retained earnings on the balance sheet
prepared as of December 31, 2019?
Answer:
1.
Rose Corporation
Income Statement
For the Year Ended December 31, 2019
Revenues:
Sales revenue $500,000
Total revenues $500,000
Expenses:
Cost of goods sold 210,000
Salary expense 80,000
Interest expense 5,000
Insurance expense 4,000
Supplies expense 6,000
Total expenses 305,000
Income before income taxes $195,000
Income tax expense 34,000
Net income $161,000
2. $500,000 - 420,000 = $80,000 Accounts receivable at the end of the year.
3. $0 beginning balance + $161,000 net income - $15,000 dividends = $146,000 Retained
earnings at the end of the year.
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).
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