Q24E_2
Question
The records of Felix Company show the following at December 31, 2018:
Assets & Liabilities: Equity:
Beginning: Common Stock \( 11,000
Assets \) 67,000 Dividends 8,000
Liabilities 11,000 Revenues 205,000
Ending: Expenses ?
Assets $ 46,000 Retained Earnings, January 1, 2018 45,000
Liabilities 34,000
Requirements
1. Compute the missing amount for Felix Company. You will need to determine Retained Earnings, December 31, 2018, and total stockholders’ equity, December 31, 2018.
2. Did Felix earn a net income or suffer a net loss for the year? Compute the amount.
Step-by-Step Solution
Verified(1) Expenses equals $241,000.
(2) Felix earned loss in 2018 of $(36,000).
Total Stockholders’ equity for 2018 End is calculated as follows:
Total Stockholders' Equity on Decemner 31, 2018 = Assets - Liabilities
= $46,000 - $34,000
= $12,000
Retaained Earnings for 2018 is calculated as follows:
Retained Earnings on December 31, 2018 = Total stockholders' Equity on December 31,2018
- common stock
= $12,000 - $11,000
= $1,000
(1) Expenses is calculated as follows:
Expenses = Retained Earnings on January 1,2018
- Retained Earnings on December 31,2018 + Revenues - Dividends
= $45,000 - $1,000 + $205,000 - $8,000
= $241,000
(2) Net income (loss) is calculated as follows:
Net Income (Loss) = Revenues - Expenses
= $205,000 - $241,000
= $(36,000)
Thus, expenses is $241,000 and net loss equals $(36,000).