Answer
See explanation
Work Step by Step
(a). Forest Park’s net income = ?
Camping Fees: 132,000 (Dollars)
General Store: 25,000 (Dollars)
Total Revenue: 132000 + 25000 = 157,000 (Dollars)
Expenses during 2010: 129,000 (Dollars)
$Formula: Net Income = Total Revenue - Expenses$
= 157,000 – 129,000 => 28,000
Forest Park’s net income for 2010: 28,000 (Dollars)
(b). Forest Park Statement of Retained Earnings as of 31 Dec 2010:
Retained earnings – (1 Jan 2010): 5,000 (Dollars)
Net Income: 28,000 (Dollars)
Total (Retained earnings + Net income): 33,000 (Dollars)
Dividends: 9,000 (Dollars)
Retained earnings as on (31 Dec 2010): 27,000 (Dollars)
Forest Park Balance Sheet as of 31 Dec 2010:
Cash: 8,500 (Dollars)
Supplies: 2,500 (Dollars)
Equipment: 114,000 (Dollars)
Total Assets (Cash + Supplies + Equipment): 125,000 (Dollars)
Accounts payable: 11,000 (Dollars)
Notes payable: 50,000 (Dollars)
Total Liabilities (Accounts + Notes): 61,000 (Dollars)
Common Stock: 40,000 (Dollars)
Retained Earnings: 27,000 (Dollars)
Total equity of stockholder (Common Stock + Retained Earnings): 67,000 (Dollars)
Grand Total of Liabilities & Stockholder’s equity: $128000.
(c). After the preparation of income statement & the balance sheet, I realized that the total of stockholder’s equity & the liabilities is greater than the net income of the business! Therefore, I think that campground manager is right in his opinion of shutting down this business.
