ABC started operations on January of 2020. Here is the Balance Sheet of ABC after three years
Question:
ABC started operations on January of 2020.
Here is the Balance Sheet of ABC after three years of operations:
Balance Sheet December 31 2022 | ||
---|---|---|
ASSETS | ||
Current assets | ||
Cash | 57,160 | |
Accounts receivable | 40,000 | |
Total assets | 97,160 | |
LIABILITIES AND SHAREHOLDER'S EQUITY | ||
Current liabilities | ||
Accounts payable | 20,000 | |
Tax payable | 2,000 | |
Loan - part within one year | 7,981 | |
Non-current liabilities | ||
Loan | 17,179 | |
Total liabilities | 47,160 | |
Shareholder's equity | ||
Capital | 40,000 | |
Retained earnings | 10,000 | |
Total shareholder's equity | 50,000 | |
Total liabilities and shareholder's equity | 97,160 |
ABC experienced the following transactions for 2023:
Transactions for 2023
- Settle all payables and receivables from 20X2 if any: accounts payables, receivables…
- Provided services for 55 000. At the end of the year, 20% are not yet paid.
- Paid salaries for 10 000.
- Incurred other operating expenses for 15 000. 10 000 were paid in cash, the rest of it is due to the suppliers.
- Net earnings for 20X0 were -2000; net earnings for 20X1 were 5 000. During 20X3, shareholders decided on a dividend of 50% of 20X2 net earnings. This dividend was paid in 20X3. Hint: first calculate net earnings for 20X2 taking into account retained earnings from the initial Balance Sheet.
- At the end of the year, ABC purchased two computers and printing equipment for 14 000 (paid cash).
Additional information for 2023
A. The loan has an annual interest rate of 5% (5 years). Payments are made annually (see table below).
Date | Capital borrowed | Annual cash payment | Interest | Amortization | Payment date | Remaining capital to be repaid |
1/1/2021 | 40,000 | 9,239 | 2,000 | 7,239 | 31/12/2021 | 32,761 |
1/1/2022 | 32,761 | 9,239 | 1,638 | 7,601 | 31/12/2022 | 25,160 |
1/1/2023 | 25,160 | 9,239 | 1,258 | 7,981 | 31/12/2023 | 17,179 |
1/1/2024 | 17,179 | 9,239 | 859 | 8,380 | 31/12/2024 | 8,799 |
1/1/2025 | 8,799 | 9,239 | 440 | 8,799 | 31/12/2025 | 0 |
B. Earnings before taxes is taxed at 30%. Taxes are paid the following year.
Needed:
1. Draw an accounting equation and record the effects of each accounting event under the appropriate headings
2. Prepare an income statement, balance sheet and statement of cash flows for each year. Use the vertical format when you prepare the financial statements
Cost Management A Strategic Emphasis
ISBN: 978-0077733773
7th edition
Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins