Exercises On Basic Computations And Selected Balances

Exercises2basic Computations The Following Selected Balances Were Ex

The following selected balances were extracted from the accounting records of Rossi Enterprises on December 31, 20X3: Accounts Payable $3,200; Interest Expense $2,500; Accounts Receivable $14,800; Land $18,000; Auto Expense $1,900; Loan Payable $40,000; Building $30,000; Tax Expense $3,300; Cash $7,400; Utilities Expense $4,100; Fee Revenue $56,900; Wage Expense $37,500. Determine Rossi's total assets as of December 31, the company's total liabilities as of December 31, and compute 20X3 net income or loss.

Paper For Above instruction

The process of financial accounting involves recording, classifying, and summarizing economic transactions to produce financial statements that represent a company's current financial position and performance. In the case of Rossi Enterprises, the selected balances provided for December 31, 20X3, enable us to determine key financial metrics such as total assets, total liabilities, and net income. Accurate calculation of these figures allows stakeholders to evaluate the company's financial health.

To calculate Rossi's total assets as of December 31, 20X3, we need to sum all asset accounts present in the balance sheet. These include Accounts Receivable, Land, Building, and Cash. The assets are classified as current or non-current, with Accounts Receivable and Cash considered current assets, and Land and Building classified as non-current assets.

The total assets calculation is as follows:

  • Accounts Receivable: $14,800
  • Land: $18,000
  • Building: $30,000
  • Cash: $7,400

Summing these amounts gives:

Total Assets = $14,800 + $18,000 + $30,000 + $7,400 = $70,200

Next, we determine the company's total liabilities as of December 31, 20X3. The liabilities listed are Accounts Payable ($3,200) and Loan Payable ($40,000). Their sum provides total liabilities:

Total Liabilities = $3,200 + $40,000 = $43,200

Calculating net income involves summing revenues and subtracting total expenses. The revenue component is Fee Revenue, amounting to $56,900. Expenses include Interest Expense ($2,500), Auto Expense ($1,900), Tax Expense ($3,300), Utilities Expense ($4,100), and Wage Expense ($37,500). The total expenses sum to:

  • $2,500 + $1,900 + $3,300 + $4,100 + $37,500 = $49,300

The net income calculation is:

Net Income = Revenue - Expenses = $56,900 - $49,300 = $7,600

This positive net income indicates that Rossi Enterprises was profitable during the period ending December 31, 20X3. The company's financial health can be further analyzed by comparing total assets with total liabilities and owner’s equity, which is not provided here but can be inferred in a comprehensive financial analysis.

Understanding these fundamental figures helps stakeholders assess the company's liquidity, financial stability, and profitability, which are critical for decision-making purposes. Moreover, accurate financial reporting facilitates compliance with accounting standards and supports strategic planning.

References

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