The Total Assets and Total Liabilities of Paul's Pools and Palaces

question 181

Essay

The total assets and total liabilities of Paul's Pools and Palaces at the beginning and at the end of the current fiscal year are as follows: $\begin{array}{lrr}& \underline{\text {Jan. 1}} &\underline{\text {Dec. 31}}\\\text { Total assets } & \$ 280,000 & \$ 475,000 \\\text { Total liabilities } & 205,000 & 130,000\end{array}$ (a) Determine the amount of net income earned during the year. No additional common stock was issued and no dividends were paid.

(b) Determine the amount of net income during the year. The assets and liabilities at the beginning and at the end of the year are unchanged from the amounts presented above. However, the sharehol ders were paid $\$ 53,000$ in cash dividends during the year (no additional purchase of common stock).

(c) Determine the amount of net income earned during the year. The assets and liabilities at the beginning and at the end of the year are unchanged from the amounts presented above. However, the sharehol ders paid for $\$ 35,000$ of common stock in June of the current fiscal year (no dividends).

(d) Determine the amount of net income earned during the year. The assets and liabilities at the beginning and at the end of the year are unchanged from the amounts presented above. However, the sharehol ders paid for $\$ 12,000$ of common stock in August of the current fiscal year and were paid twel ve monthly cash dividends of $\$ 1,500$ each during the year.

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Definitions:

First Processing Department

is the initial stage or department in a manufacturing process where the raw materials start their transformation into finished goods.

Step-Down Method

A cost allocation method used in managerial accounting that allocates service department costs to other parts of an organization, including production departments.

Service Department Costs

Expenses incurred by support departments within a company, such as maintenance and administration, which do not directly produce goods or services but are necessary for operations.

Direct Method

A way of allocating service department costs directly to producing departments without any intermediate allocations, typically used in cost accounting.