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Miracle Tool Co. sells a single product (a combination screwdriver, pliers, and crescent wrench) exclusively through television advertising. The comparative income ats and statements of financial position are for the past two years. nal Information Lowing information regarding the company's operations in 2013 is available from the y's accounting records: 00 cash dividend

Miracle Tool Co. sells a single product (a combination screwdriver, pliers, and crescent wrench) exclusively through television advertising. The comparative income ats and statements of financial position are for the past two years. nal Information Lowing information regarding the company's operations in 2013 is available from the y's accounting records: 00 cash dividend

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ouestin 7 Miracle Tool Co. sells a single product (a combination screwdriver, pliers, hammer, and crescent wrench) exclusively through television advertising. The comparative income statements and statements of financial position are for the past two years. Additional Information The following information regarding the company's operations in 2013 is available from the company's accounting records: 1. Early in the year the company declared and paid a $40,000 cash dividend. 2. During the year equity securities costing $150,000 were sold for $140,000 cash, resulting in a $10,000 nonoperating loss. 3. The company purchased property, plant, and equipment for $200,000, paying $20,000 in cash and issuing a note payable for the $180,000 balance. 4. During the year the company repaid a $100,000 note payable, but incurred an additional $180,000 in long-term debt as described in 3. 5. The owners invested $150,000 cash in the business as a condition of the new loans described in paragraph 4. TOOL COMPANY ative Income Statements Forthe Years Ended 31 Decembér 2012 and 2013 2012 2013 Sales...... Less: Cost of goods sold Gross profit on sales... $5,000,000 2,000,000 $3,000,000 $3,500,000 1,400,000 $2,100,000 Less: Operating expenses (including depreciation of $340,000 in 2012 and $350,000 in 2013). Loss on sale of equity securities Profit (loss) for the year 2,430,000 10,000 ($ 340,000) 2,600,000 $ 400,000 MRACLE TOOL COMPANY Comparative Statements of Financial Positio 31 December 2012 2013 Assets $ 600,000 50,000 230,000 1,220,000 2,850,000 Cash and cash equivalents Equity securities Accounts receivable $ 100,000 200,000 400,000 1,200,000 3,000,000 $4,900,000 inventory......... Property, plant, and equipment (net of accurmulated depreciation) Total $4,950,000 Liabilities & Equity Accounts payable . Accrued expenses payable Note payable Share capital. Retained earnings $ 730,000 $ 500,000 170,000 2,450,000 1,200,000 580,000 $4,900,000 140,000 2,530,000 1.350.000 200,000 $4,950,000 Totals In strutwn. Prepae (using indiaet mehod). statemet Carh flerii for the year enterd. Dicanbar, 31 ,2013
Transcribed Image Text:Ouestin 7 Miracle Tool Co. sells a single product (a combination screwdriver, pliers, hammer, and crescent wrench) exclusively through television advertising. The comparative income statements and statements of financial position are for the past two years. Additional Information The following information regarding the company's operations in 2013 is available from the company's accounting records: 1. Early in the year the company declared and paid a $40,000 cash dividend. 2. During the year equity securities costing $150,000 were sold for $140,000 cash, resulting in a $10,000 nonoperating loss. 3. The company purchased property, plant, and equipment for $200,000, paying $20,000 in cash and issuing a note payable for the $180,000 balance. 4. During the year the company repaid a $100,000 note payable, but incurred an additional $180,000 in long-term debt as described in 3. 5. The owners invested $150,000 cash in the business as a condition of the new loans described in paragraph 4. TOOL COMPANY ative Income Statements Forthe Years Ended 31 Decembér 2012 and 2013 2012 2013 Sales...... Less: Cost of goods sold Gross profit on sales... $5,000,000 2,000,000 $3,000,000 $3,500,000 1,400,000 $2,100,000 Less: Operating expenses (including depreciation of $340,000 in 2012 and $350,000 in 2013). Loss on sale of equity securities Profit (loss) for the year 2,430,000 10,000 ($ 340,000) 2,600,000 $ 400,000 MRACLE TOOL COMPANY Comparative Statements of Financial Positio 31 December 2012 2013 Assets $ 600,000 50,000 230,000 1,220,000 2,850,000 Cash and cash equivalents Equity securities Accounts receivable $ 100,000 200,000 400,000 1,200,000 3,000,000 $4,900,000 inventory......... Property, plant, and equipment (net of accurmulated depreciation) Total $4,950,000 Liabilities & Equity Accounts payable . Accrued expenses payable Note payable Share capital. Retained earnings $ 730,000 $ 500,000 170,000 2,450,000 1,200,000 580,000 $4,900,000 140,000 2,530,000 1.350.000 200,000 $4,950,000 Totals In strutwn. Prepae (using indiaet mehod). statemet Carh flerii for the year enterd. Dicanbar, 31 ,2013
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