Problem 1

The following income statement and current sections of the balance sheet are for Capstone, Inc:

December 31 2012 2011 Current assets Cash $ 62,000 $ 76,000 Accounts receivable 21,000 24,000 Merchandise inventory 45,000 33,000 Prepaid expenses 11:000 12,200 Current liabilities Accounts payable 53,000 60,500 Income tax payable 8,600 13,400Capstone, Inc. Income Statement for the Year Ended December 31, 2012 Sales 5990,000 Cost of goods sold 520,000 Gross margin $470,000 Selling and administrative expenses 110,000 Depreciation expense 63.000 Operating income $297,900 Loss on sale of equipment (4,100) Income before taxes $292,900 Income tax expense 112.900 Net income $180,000