Question
Magic Enterprises borrowed $18,000 from the local bank on Julyl 1, 2010, when the company was started. The note had an 8 percent annual interest
| Magic Enterprises borrowed $18,000 from the local bank on Julyl 1, 2010, when the company was started. The note had an 8 percent annual interest rate and a one-year term to maturity. Magic Enterprises recognized $42,500 of revenue on account in 2010 and $45,000 of revenue on account in 2011. Cash collections from accounts receivable were $36,000 in 2010 and $35,000 in 2011. Magic Enterprises paid $24,000 of salaries expense in 2010 and $28,000 of salaries expense in 2011. Repaid the loan and interest at the maturity date. |
| Required: |
| (Round all calculations to the nearest whole dollar amount. Negative amount should be indicated with a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) |
| a. | Organize the information in accounts under an accounting equation. |
| b. | What amount of net cash flow from operating activities would Magic report on the 2010 cash flow statement? |
| c. | What amount of interest expense would Magic report on the 2010 income statement? |
| d. | What amount of total liabilities would Magic report on the December 31, 2010, balance sheet? |
| e. | What amount of retained earnings would Magic report on the December 31, 2010, balance sheet? |
| f. | What amount of cash flow from financing activities would Magic report on the 2010 statement of cash flows? |
| g. | What amount of interest expense would Magic report on the 2011 income statement? |
| h. | What amount of cash flows from operating activities would Magic report on the 2011 cash flow statement? |
| i. | What amount of total assets would Magic report on the December 31, 2011, balance sheet? |
a.
| Magic Enterprises Effect of Events on the General Ledger 2010 and 2011 | |||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | |||||
| Event | Cash | Acct.Rec. | = | Notes Pay. | Int. Pay. | + | Com. Stock | Retained Earnings | Acct. Title/RE |
| 2009 | |||||||||
| 1. | |||||||||
| 2. | Rev. | ||||||||
| 3. | |||||||||
| 4. | Sal. Exp. | ||||||||
| 5. | 1 | Int. Exp. | |||||||
| Bal. | = | + | |||||||
| 2011 | |||||||||
| B. Bal. | = | + | |||||||
| 1. | Rev. | ||||||||
| 2. | |||||||||
| 3. | Sal. Exp. | ||||||||
| 4. | 2 | Int. Exp. | |||||||
| 5. | |||||||||
| Bal. | = | + | |||||||
| 1$ x % x /12 = $ | |||||||||
| 2$ x % x /12 = $ | |||||||||
| b. | $ = ($ - $ ) | f. | $ |
| c. | $ | g. | $ |
| d. | $ | h. | $ |
| e. | $ | i. | $ |
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