Reference no: EM132421237

1. Bennett Griffin and Chula Garza organized Cole Valley Book Store as a corporation; each contributed $80,000 cash to start the business and received 4,000 shares of common stock. The store completed its first year of operations on December 31, current year. On that date, the following financial items for the year were determined: December 31, current year, cash on hand and in the bank, $75,600; December 31, current year, amounts due from customers from sales of books, $39,000; unused portion of store and office equipment, $73,000; December 31, current year, amounts owed to publishers for books purchased, $12,000; one-year note payable to a local bank for $3,000. No dividends were declared or paid to the stockholders during the year.

a. Complete the following balance sheet as of the end of current year.

ASSETS

LIABILITIES

Cash

Accounts payable

Accounts receivable

Note payable

Store and office equipment

Interest payable

Total liabilities

STOCKHOLDERS' EQUITY

Common stock

Retained earnings

Total stockholders' equity

Total assets

Total liabilities and equity

b. What was the amount of net income for the year? (Hint: Use the retained earnings equation [Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings] to solve for net income.)