The following adjusted trial balances have been extracted from the records of Dark Edge Sports Inc. at December 31, 2016 and 2017. Assume all accounts have normal debit and credit balances.
|
Account |
2017 |
2016 |
|
Accounts payable |
$ 8,350 |
$ 6,000 |
|
Accounts receivable |
18,700 |
6,800 |
|
Accumulated depreciation – equipment |
2,000 |
1,000 |
|
Advertizing expense |
6,200 |
5,000 |
|
Bank loan, due May 31, 2018 |
10,000 |
5,000 |
|
Cash |
1,500 |
2,000 |
|
Depreciation expense – equipment |
1,000 |
1,000 |
|
Dividends |
42,300 |
29,000 |
|
Equipment |
48,200 |
48,200 |
|
Income taxes expense |
2,300 |
800 |
|
Income taxes payable |
3,600 |
3,000 |
|
Insurance expense |
1,200 |
1,100 |
|
Interest expense |
1,300 |
500 |
|
Merchandize inventory |
1,300 |
2,000 |
|
Prepaid insurance |
1,300 |
1,300 |
|
Prepaid rent |
600 |
600 |
|
Rent expense |
550 |
550 |
|
Repairs expense |
1,100 |
900 |
|
Retained earnings (Jan. 1) |
? |
25,550 |
|
Revenue – fees |
83,000 |
80,000 |
|
Salaries expense |
21,600 |
20,100 |
|
Share capital |
3,000 |
3,000 |
|
Telephone expense |
100 |
100 |
|
Utilities expense |
3,600 |
3,600 |
Required:
- Prepare income statements and statements of changes in equity for the years ended December 31, 2016 and 2017, and classified balance sheets at December 31, 2016 and 2017.
- By what amounts do total current assets exceed total current liabilities at each year-end? Comment on the differences between 2016 and 2017.
- Assume a $5,000 bank loan is received at the end of 2017, payable in six months. What is the effect on your answer to (2) above?
- As the bank manager, what questions might you raise regarding the loan?
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