On January 1, 2012, the organizers of the Parsons Corporation obtained their charter and issued 10,000 shares of $1 par common stock for $4 per share. During 2012, the corporation earned $30,000 in cash revenue and paid $20,000 in cash expenses, not including income tax. The income tax rate was 30%, and the company's income tax expense was $3,000. The company declared and paid cash dividends totaling $2,000. Using the above information, prepare an income statement and a balance sheet for the Parsons Corporation.
To prepare an income statement and balance sheet for the Parsons Corporation, we need to consider the given information and the standard formats for these financial statements.
1. Income Statement:
The income statement shows the revenues, expenses, and net income (or loss) of a company over a specific period, typically one year.
To calculate the net income, we need to subtract the expenses from the revenues. Given the information, let's calculate the net income for the Parsons Corporation:
Revenue: $30,000
Expenses: $20,000
Income Tax Expense: $3,000
Net Income = Revenue - Expenses - Income Tax Expense
Net Income = $30,000 - $20,000 - $3,000
Net Income = $7,000
Therefore, the income statement for the Parsons Corporation would be as follows:
PARSONS CORPORATION
Income Statement
For the Year Ended December 31, 2012
Revenue: $30,000
Expenses: $20,000
Income Tax Expense: $3,000
Net Income: $7,000
2. Balance Sheet:
The balance sheet provides a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and shareholders' equity.
To prepare the balance sheet, we need to consider the equity section as well. Given the information, let's calculate the equity:
Common Stock:
Number of shares: 10,000
Par value per share: $1
Common Stock = Number of shares * Par value per share
Common Stock = 10,000 * $1
Common Stock = $10,000
Retained Earnings:
Net Income: $7,000
Dividends: $2,000
Retained Earnings = Net Income - Dividends
Retained Earnings = $7,000 - $2,000
Retained Earnings = $5,000
Therefore, the balance sheet for the Parsons Corporation would be as follows:
PARSONS CORPORATION
Balance Sheet
As of December 31, 2012
Assets:
No information about assets is provided, so we cannot include them in the balance sheet.
Liabilities:
No information about liabilities is provided, so we cannot include them in the balance sheet.
Equity:
Common Stock: $10,000
Retained Earnings: $5,000
Note: The balance sheet is incomplete without the information about assets and liabilities. It is necessary to have a complete picture of the company's financial position.