Homework SourseApple began operations in May 2003 by selling common stock t
Apple began operations in May, 2003 by selling common stock to owners in exchange for $90,000 cash. During 2003, Apple entered into the following transactions:
1. On May 23, Apple purchased inventory for $50,000 cash.
2. On June 1, Apple purchased a three-year insurance policy for $23,400 cash.
3. On July 1, Apple received $49,500 cash from a customer for services to be performed over the next 18 months.
4. On August 1, Apple purchased equipment for $60,000 cash. The equipment was assigned a 10-year life and a $2,400 residual value.
5. On August 18, Apple sold one-half of the inventory that was purchased on May 23 to a customer for $44,000 cash.
Calculate the net income that Apple would report in its December 31, 2003 balance sheet after all the above transactions are recorded and all necessary adjusting entries are made and posted.
Solution
Net Income that Apple would report in its 31st Dec\'2003 in Balance sheet is $28,550.
Please see the detailed working for this as below:-
Journal Entries
| Statement Showing Profit & Loss | ||||
| as on 31st Dec, 2003 | ||||
| Particulars | Amount($) | |||
| Revenue :- | ||||
| Sale of Goods | 44,000 | |||
| Sale of Services | 16,500 | |||
| Total Revenue(A) | 60,500 | |||
| Cost | ||||
| Insurance Cost | 4,550 | |||
| Cost of Goods Sold | ||||
| Purchase | 50,000 | |||
| (-) Closing Stock | (25,000) | 25,000 | ||
| Depreciation | 2,400 | |||
| Total Cost(B) | 31,950 | |||
| Net Income or Profit(A-B) | 28,550 | |||
| Balance Sheet | ||||
| as on 31st Dec, 2003 | ||||
| Particulars | Amount($) | |||
| Non Current Assets | ||||
| Equipment | 60,000 | |||
| Less: Accumulated Dep | (2,400) | 57,600 | ||
| Current Assets | ||||
| Cash | 50,100 | |||
| Inventory | 25,000 | |||
| Prepayment or Prepaid | 18,850 | 93,950 | ||
| Total Assets | 151,550 | |||
| Equity & Liabilities | ||||
| Share Capital | 90,000 | |||
| Profit/Retained Earning | 28,550 | |||
| Current Liabilities | ||||
| Deferred Revenue | 33,000 | |||
| Total Liabilities | 151,550 |
