Chapter 2, Problem 2.17P

Problem 2.17

LO 2, 3, 4

Understanding and analyzing financial statement relationships-sales/service organization Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2016. Assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year then ended.

Accounts receivable	$ 99,000
Depreciation expense	36,000
Land	81.000
Cost of goods sold	270.000
Retained earnings	177,000
Cash	27,000
Equipment	213,000
Supplies	18,000
Accounts payable	69,000
Service revenue	60,000
Interest expense	12,000
Common stock	30,000
Income tax expense	36,000
Accumulated depreciation	135,000
Long-term debt	120,000
Supplies expense	42,000
Merchandise inventory	93,000
Sales revenue	420,000

Required:

1. Calculate the total current assets at December 31, 2016.
2. Calculate the total liabilities and stockholders’ equity at December 31, 2016.
3. Calculate the earnings from operations (operating income) for the year ended December 31, 2016.
4. Calculate the net income (or loss) for the year ended December 31, 2016.
5. 'What was the average income tax rate for Pope’s Garage for 2016?
6. If $48,000 of dividends had been declared and paid during the year, what was the January 1, 2016, balance of retained earnings?