Prepare the income statement for 2020 TPR had one major creditor at the beginning of 2020. One of the major banks loaned TPR $500,000 for ongoing operating costs. The outstanding portion of the loan was $400,000 at the beginning of the vear. The bank requires TPR to maintain a current ratio of 1.8:1 or the loan may become immediately repayable. It also requires TPR to have a debt to total asset ratio of no greater than 55%. Information required for adjusting journal entries: 1. There is no interest accrual required for the mortgage loan on the building because payment was made on December 31. The loan for the balloon machine carries an interest rate of 5% and has been outstanding for 15 days. 2. Depreciation of $800 on the cash register machines and $15,000 on the other equipment has not yet been recorded. 3. A dividend of $2,000 was declared but has not been recorded. It will be paid in March 2021. 4. The monthly electricity bill of $2,000 was received in early January 2021. This bill is for the month of December 2020. 5. Income tax expense of $27,000 is estimated as the payable. 6. Only 40% of the prepaid insurance amount related to 2020. 7. The lawyer's invoice for $800 for services performed in December 2020 was received in early January 2021. 8. Salaries that related to December 31, 2020, and not paid by the year end amounted to $12,000.
Prepare the income statement for 2020 TPR had one major creditor at the beginning of 2020. One of the major banks loaned TPR $500,000 for ongoing operating costs. The outstanding portion of the loan was $400,000 at the beginning of the vear. The bank requires TPR to maintain a current ratio of 1.8:1 or the loan may become immediately repayable. It also requires TPR to have a debt to total asset ratio of no greater than 55%. Information required for adjusting journal entries: 1. There is no interest accrual required for the mortgage loan on the building because payment was made on December 31. The loan for the balloon machine carries an interest rate of 5% and has been outstanding for 15 days. 2. Depreciation of $800 on the cash register machines and $15,000 on the other equipment has not yet been recorded. 3. A dividend of $2,000 was declared but has not been recorded. It will be paid in March 2021. 4. The monthly electricity bill of $2,000 was received in early January 2021. This bill is for the month of December 2020. 5. Income tax expense of $27,000 is estimated as the payable. 6. Only 40% of the prepaid insurance amount related to 2020. 7. The lawyer's invoice for $800 for services performed in December 2020 was received in early January 2021. 8. Salaries that related to December 31, 2020, and not paid by the year end amounted to $12,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Prepare the income statement for 2020
TPR had one major creditor at the beginning of 2020. One of the major banks loaned TPR $500,000 for ongoing operating costs. The outstanding portion of the loan was $400,000 at the beginning of the vear. The bank requires TPR to maintain a current ratio of 1.8:1 or the loan may become immediately repayable. It also requires TPR to have a debt to total asset ratio of no greater than 55%.
Information required for adjusting journal entries:
1. There is no interest accrual required for the mortgage loan on the building because payment was made on December 31. The loan for the balloon machine carries an interest rate of 5% and has been outstanding for 15 days.
2. Depreciation of $800 on the cash register machines and $15,000 on the other equipment has not yet been recorded.
3. A dividend of $2,000 was declared but has not been recorded. It will be paid in March 2021.
4. The monthly electricity bill of $2,000 was received in early January
2021. This bill is for the month of December 2020.
5. Income tax expense of $27,000 is estimated as the payable.
6. Only 40% of the prepaid insurance amount related to 2020.
7. The lawyer's invoice for $800 for services performed in December
2020 was received in early January 2021.
8. Salaries that related to December 31, 2020, and not paid by the year end amounted to $12,000.
Transcribed Image Text:Accounts receivable
Merchandise inventory
Prepaid insurance
Prepaid advertising
Cash register machines
Accumulated depreciation Cash register machines
Equipment
Accumulated depreciation Equipment
Accounts payable
Salaries payable
Accrued liabilities
Unearned revenue
Interest payable
Dividend payable
Income taxes payable
Loan payable-Balloon machine
Cash
Long-term loan-Building
Common shares
Retained earnings
Sales revenue
Room rental revenue
Cost of goods sold
Hydroelectricity expense
Telephone expense
Interest expense
Salary expense
Insurance expense
Supplies expense
Advertising expense
Depreciation expense (all assets)
Miscellaneous expense
Legal expense
Income tax expense
Dividends
Debit
$ 49,000
2,300
312,000
2,200
1,000
8,300
324,000
502,000
83,000
23,000
15,000
318,000
10,500
8,300
3,200
0
21,000
S
Credit
4,400
88,000
18,000
0
1,100
0
30,000
385,000
35,000
42,300
1,036,000
43,000
$1,682,800 $1,682,800
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