Chapter 2, Problem 2.18P

Problem 2.18

LO 2. 3, 4

Understanding and analyzing financial statement relationships-merchandising organization Gary’s TV 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.

Interest expense	$ 9,000
Paid-in capital	20.000
Accumulated depreciation	6,000
Notes payable (long-term)	70,000
Rent expense	13,000
Merchandise inventory	210,000
Accounts receivable	43,000
Depreciation expense	3,000
Land	32,000
Retained earnings	225,000
Cash	36,000
Cost of goods sold	440,000
Equipment	13,000
Income tax expense	60,000

Accounts payable

23,000

Sales revenue

620.000

Required:

1. Calculate the difference between current assets and current liabilities for Gary’s TV at December 31, 2016.
2. Calculate the total assets 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 Gary’s TV for 2016?
6. If $64,000 of dividends had been declared and paid during the year, what was the January 1, 2016, balance of retained earnings?