REQUIRED: Prepare a detailed balance sheet. Listed below is a list of accounts and their respective balances for the Maximum Company: ADVERTISING EXPENSE $ 100,000 INSURANCE EXPENSE $ 100,000 OPERATING EXPENSES- OTHER $ 75,000 PURCHASES $ 50,000 REVENUES $ 1,000,000 SALARIES AND WAGES $250,000 Other Information: Inventory at the beginning of the year was $ 50,000 and at the end of the year was $ 40,000. Accrued wages of $ 5,000 have not been included in the above balances. Payroll taxes are 25% of Salaries and Wages. Total Fixed Assets equal $ 3,000,000 which breaks down as follows: Land- $750,000; Building and Equipment- $2,000,000; and Furniture- $250,000. For depreciation purposes, the XYZ Company uses the straight-line method. The depreciable assets have a useful life of 10 years and no residual value. XYZ has a long-term note of $ 1,000,000 and pays an interest rate of 10%. Rent is calculated as 1% of gross profit plus $500 per month. The XYZ pays income taxes at a rate of 25%. REQUIRED Prepare a detailed income statement.

Maximum Company

Income Statement

Revenue                                                                                  $ 1,000,000

Less Cost of Sales

Beginning Inventory                                         $ 50,000

Purchases                                                          $ 50,000

Less Ending Inventory                                     ($40,000)         ($60,000)

Gross Profit                                                                                $940,000

Less Expenses

Salaries and Wages ($250,000 + $5,000)    $255,000

Advertising expenses                                      $100,000

Insurance expenses                                         $100,000

Other Operating expenses                               $75,000

Depreciation                                                    $225,000

Interest expense                                              $100,000

Rent expense                                                       $9,900

Payroll taxes                                                       $63,750    ($898,650)

Net Income before tax                                                              $41,350

Income tax expense                                                                ($10,338)

Net Income after tax                                                                  $31,012

Explanation:

Depreciation expense :

Depreciation expense = (Cost - Salvage Value) ÷ Estimated Useful Life

therefore,

Depreciation expense = ($2,250,000) ÷ 10 = $225,000

Note :Land is not a depreciable asset    

Interest expense :

Interest expense = $1,000,000 x 10% = $100,000      

Rent expense :

Use the cost formula provided.

Rent expense = Gross profit x 1 % + $500        

                        = $940,000 x 1 % + $500

                        = $9,900        

answer; is the sum of all individual demands curves;

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.