Gin and Tom Ltd is a clothing wholesaler, which has been operating for only 1 year. At the beginning of its second year of operations, the company has the following items on its balance sheet:

Fixed Assets	2,000
Cash	2,000
Common Stock	400
Retained Earnings	600
5- year Bank Loan	3,000

During the second year, the company did the following transactions:

• Purchases inventory (clothing) for $700, on credit.
• Sells inventory, which originally cost $600, for $1,400. Half of the customers buy on credit and the other half pays in cash.
• Pays $150 at advertising and $75 at insurance. The advertising is paid in cash; however, the insurance will be paid in cash later.
• Purchases a new storage facility for $600, on credit.
• Pays the warehouse employees $200 in cash.
• Pays interest of 10% on its loan, in cash.
• Pays $400 for accounts payables.
• Receives $400 from its customers.
• The company's accountant calculates that because of the above transactions, the company will have to pay tax of $100 later.
• The board of directors decides to pay a dividend of $50 (the dividend is not paid by the end of the fiscal year).

You are given a worksheet for Gin and Tom Ltd's second fiscal year. Fill in the opening balances (from the end of the first year) and record the transactions during the second year. Calculate closing balances and then, using the formats given, create a closing balance sheet and an income statement.

TRANSACTION WORKSHEET

	ASSETS	SHAREHOLDERS' EQUITY	LIABILITIES
	Fixed Assets	Inventory	Acc Receiv	Cash	Comm Stock	Ret Earning	Income State	Bank Loan	Acc Payable	Tax Payable	Dividends Payable
Opening balances
Purchase inventory
Sales
Cost of sales
Insurance
Advertising
Purchase storage fac.
Salaries
Interest
Pay accounts payable
Collect accounts rec.
Tax
Dividend
Transfer retained earnings
Closing balances

Income Statement

Sales
Cost of Sales
Gross Profit
Operating Expenses
Profit before Interest and Tax
Interest
Profit Before Tax
Tax
Profit After Tax

Balance Sheet

CURRENT ASSETS
Cash
Accounts Receivable
Inventory
Total Current Assets
FIXED ASSETS
Plant and Machinery
Total Long Term Assets
TOTAL ASSETS
CURRENT LIABILITIES
Accounts Payable
Dividends Payable
Tax Payable
Total Current Liabilities
LONG TERM LIABILITIES
Bank Loan
Total Long Term Liabilities
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Common Stock
Retained Earnings
Total Shareholders' Equity