Question

The December 31, 2021, adjusted trial balance for the Blueboy Cheese Corporation is presented below.

Account Title	Debits		Credits
Cash	68,500
Accounts receivable	250,000
Prepaid rent	5,000
Inventory	35,000
Office equipment	450,000
Accumulated depreciation			190,000
Accounts payable			40,000
Notes payable (due in six months)			15,000
Salaries payable			6,000
Interest payable			500
Common stock			400,000
Retained earnings			70,000
Sales revenue			600,000
Cost of goods sold	360,000
Salaries expense	90,000
Rent expense	15,000
Depreciation expense	45,000
Interest expense	1,000
Advertising expense	2,000
Totals	1,321,500		1,321,500

Required:
1-a. Prepare an income statement for the year ended December 31, 2021.
1-b. Prepare a classified balance sheet as of December 31, 2021.
2. Prepare the necessary closing entries at December 31, 2021.

Answer 1

$ 600,000 Blueboy Cheese Corporation Income Statement For the Year Ended December 31 Sales Revenue Operating expenses: Cost of goods sold $ 360,000 Salaries expense $ 90,000 Rent expense $ 15,000 Depreciation Expense $ 45,000 Interest Expense $ 1,000 Advertising Expense $ 2,000 Total operating expenses Net Income $ $ 513,000 87,000 Blueboy Cheese Corporation Statement of Retained Earnings For the Year Ended December 31 Retained Earnings beginning balance Add: Net Income Retained Earnings Ending balance $ $ $ 70,000 87,000 157,000

Balance Sheet Assets Current assets Cash Accounts receivable Prepaid rent Inventory Total Current Assets Non-current assets Office Equipment Less: Accumulated Depreciation Total Assets $ $ $ $ 68,500 250,000 5,000 35,000 $ 358,500 $ $ 450,000 190,000 $ 260,000 $ 618,500 Liabilities and Owners' Capital Current liabilities Accounts Payable $ 40,000 Notes Payable $ 15,000 Salaries Payable $ 6,000 Interest Payable $ 500 Total Current Liabilities Total Laibilities Stockholders' Equity Common Stock $ 400,000 Retained Earnings $ 157,000 Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ $ 61,500 61,500 $ $ 557,000 618,500

Credit Debit $ 600,000 Date Account Titles and Explanation 31-Dec Sales Revenue Income Summary (To close revenue account) $ 600,000 $ 513,000 31-Dec Income Summary Cost of goods sold Salaries Expense Rent Expense Depreciation Expense Interest Expense Advertising Expense (To close expense accounts) $ $ $ $ $ $ 360,000 90,000 15,000 45,000 1,000 2,000 $ 87,000 31-Dec Income Summary Retained Earnings (To close income summary) $ 87,000