Solution to practice problemYou have been hired as the accountant to prepare financial statements for Hungry Dog,Inc.Unfortunately, on your way to deliver the statements to the client, one of their petsdecided that the financial statements that you’ve prepared would make a tasty treat. You were able to salvage the following information:Hungry Dog, Inc. Hungry Dog, Inc.Balance Sheet Income StatementYear-Ending Dec. 31, 200412/31/2003 12/31/2004ASSETS REVENUESCash ( C ) ( D ) Sales Revenue 70,000Accounts Receivable 5,000 5,500 Cost of Sales ______(A)____Inventory 10,000 13,000 Gross Margin 30,000Plant & Equipment (net) 15,000 _____( F )Total Assets ( B ) ???? OTHER EXPENSES======= ======= Wages Expense 18,000LIABILITIES Overhead Expense 5,000Accounts Payable 3,000 5,000 Total Other Expenses 23,000Notes Payable 6,000 6,000Total Liabilities 9,000 11,000Net Income ????EQUITY =======Contributed Capital 20,000 20,000Retained Earnings 5,000 ( E )Total Equity 25,000 ???? Hungry Dog, Inc.Statement of Cash FlowsTotal Liabilities and Equity 34,000 ???? Year-Ending Dec. 31, 2004======= =======Cash from Operations 6,000 Cash from Investing (3,000)Cash from Financing (2,000)Net Change in Cash ????Based on other shreds of information, you’ve also been able to determine that:(i) That “Cash from Investing” related to a purchase of Plant and Equipment, and that no Plant and Equipment was sold during the year.(ii) The only “Financing” activity was a payment of dividends in the amount of $ 2,000. Using the above information, please provide the items indicated on the following page:A. (3 points) Cost of Sales for Year-Ending Dec. 31, 2004:______40,000_____________= 70,000 – 30,000 = 40,000B. (3 points) Total Assets as of December 31, 2003: ______34,000_____________ According to accounting equation.C. (3points) Cash Balance – December 31, 2003: ______4,000______________= total assets – AR – Inventory – P&P = 34,000-5,000 – 10,000 – 15,000 = 4,000D. (3points) Cash Balance - December 31, 2004: ________5,000_____________= Beginning balance – changes = 4,000 + 1,000 = 5,000E. (4 points) Retained Earnings – December 31, 2004:________10,000____________= beginning bal. + NI – DIVIDENDS = 5,000 + 7,000 – 2,000 = 10,000F. (3points) Plant and Equipment – December 31, 2004:________17,500____________= Total assets – cash – AR – INVETORY = total liabilities + shareholder’sequity – cash – AR – INVENTORY = 11,000+20,000+10,000 – 5,000 – 5,500 –13,000 =
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