Problem 4-1 Fluff Inc., Year 2 - 20X2 (See page 81 for beginning balances) During the second year, you bought 15 Fluffs and sold 12, same prices as year 1, but you have arranged terms that allow you to pay 40% of the purchase price in cash and the rest in one year. You now sell Fluffs for 50% down and the rest will be paid for by the customer next year. You paid rent of $12,000. You hired a worker whom you paid $11,000 (a Miami graduate). Tax rate is the same (30% of taxable income). Paid 20X 1 taxes. You will pay 20X2 taxes next year. You paid the interest to Mike on December 31. You paid office expenses of $10,000 and a dividend of $1,000. You also paid $6,000 for advertising in The Post. On February 1"you issued 50 shares of common stock for $12,000. You owe your employee $1,000 more in wages at the end of the year. So how did you do? Prepare Journal Entries, T-Accounts, Income Statement, Statement of Owners' Equity and Balance Sheet. 600 10.000 10.600 Begining Fluff, Inc. Balance Sheet December 31, 20X1 Liabilities Assets Current Assets Current Liabilities S Cash Taxes Payable $22.400 Inventory 9.000 Long-Term Liabilities Total Current Assets 31,400 Note Payable- Mike Total Liabilities Fixed Assets Owners' Equity Land 40,000 Common Stock 60,000 Other Assets Retained Eamings 2.800 Security Deposit 2.000 Total Owners' Equity 62.800 Total Assets $73.400 Total Liabilities & Owners' Equity $73.400 Fluff, Inc. Income Statement For the Year Ended December 31, 20X1 Sales S 35,000 Cost of Goods Sold 15,000 Gross Margin 20,000 Operating Expenses Rent Expense 10,800 Advertising Expense 4,200 Total Operating Expenses 15,000 Operating Income 5,000 Other Revenues & Income before Taxes 4,000 Tax Expense 1.200 Net Income $ 2.800 Earnings Per Share S 15.27 Balance Fluff, Inc. Statement of Owners' Equity For the Year Ended December 31, 20X1 Common Stock Shares Amount $ 0 300 60,000 Retained Earnings $ 0. Balance, December 31, 20X0 Common Stock Issued Net Income Dividends Declared Balance, December 31, 20X1 2,800 (0) $2,800 Totals S 0 60,000 2,800 (0) $62.800 300 $60,000