29 Jun Question P1. PXE Company presented the follow
Question
P1. PXE Company presented the following comparative balance sheets at December 31, 2005 and 2006, and the income statement for the year ended December 31, 2006:
PXE Company
Balance Sheets
December 31, 2006 and 2005
December 31, 2006 December 31, 2005
Assets
Cash $ 12,200 $ 28,200
Accounts receivable 16,000 18,000
Inventory 19,500 22,000
Prepaid rent 200 300
Total current assets $ 47,900 $ 68,500
Land 58,000 30,000
Equipment 65,000 60,000
Accumulated depreciation (11,000) (4,000)
Total assets $159,900 $154,500
Liabilities and stockholders’ equity
Accounts payable $ 13,000 $ 25,000
Salaries payable 2,000 2,500
Interest payable 2,500 4,000
Income tax payable 6,500 3,000
Dividends payable 4,000 0
Total current liabilities $ 28,000 $ 34,500
Long-term notes payable 10,000 40,000
Common stock, $1 par 30,000 28,000
Preferred stock, $4 par 24,000 10,000
Additional paid-in capital 45,000 30,000
Retained earnings 22,900 12,000
Total liabilities and stockholders’ equity $159,900 $154,500
PXE Company
Income Statement
For the Year Ended December 31, 2006
Sales $ 400,000
Cost of goods sold (250,000)
Gross profit $ 150,000
General and administrative expenses $80,000
Salaries expense 31,000
Rent expense 3,600
Depreciation expense 7,000
Total operating expenses (121,600)
Other revenue and expenses:
Gain on sale of land $ 3,000
Interest revenue 300
Interest expense (2,800) 500
Income before income taxes $ 28,900
Income tax expense (8,000)
Net income $ 20,900
Additional information:
a. The company declared dividends in the amount of $10,000 during the year.
b. Additional land and equipment were purchased for cash.
c. Land that had originally cost $9,000 was sold for $12,000 cash.
d. All accounts payable are related to merchandise purchases.
e. The company uses a perpetual LIFO inventory system and uses straight-line depreciation for all depreciable assets.
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