Cookie Creations 18 The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2018, follows.
| COOKIE & COFFEE CREATIONS INC. |
October 31, 2018
| ?????Inventory ||17,897|
|Property, Plant, and Equipment|
| ?????Equipment ||$99,700|
| ?????Accumulated depreciation?equipment ||(9,850||)||89,850|
|Liabilities and Stockholders' Equity|
| ?????Accounts payable ||$5,848|
| ?????Income tax payable ||18,500|
| ?????Dividends payable ||700|
| ?????Salaries and wages payable ||2,250|
| ?????Interest payable ||188|
| ?????Note payable?current portion ||4,000||$31,486|
| ?????Note payable?long-term portion ||6,000|
| Total liabilities ||37,486|
| ?????Paid-in capital |
| ???????Preferred stock, 2,800 shares issued and?outstanding ||$14,000|
| ???????Common stock, 25,930 shares issued, 25,180 outstanding ||25,930||39,930|
| Retained earnings ||72,600|
| ?????Total paid-in capital and retained earnings ||112,530|
| ?????Less: Treasury stock?common (750 shares), at cost ||(500||)|
| ???????Total stockholders? equity ||112,030|
|???????Total liabilities and stockholders' equity||$149,516|
|COOKIE & COFFEE CREATIONS INC. |
Year Ended October 31, 2018
|Cost of goods sold||231,250|
|?????Salaries and wages expense||$92,500|
|?????Other operating expenses||35,987||138,337|
|Income from operations||92,913|
|Income before income tax||92,500|
|Income tax expense||18,500|
Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. Dividends on preferred stock were $1,250. Since this is the first year of operations and the beginning balances are zero, use the ending balance as the average balance where appropriate.
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