Question

The adjusted trial balance for Chiara Company as of December 31 follows.

	Debit			Credit
Cash	$	185,900
Accounts receivable		54,500
Interest receivable		18,600
Notes receivable (due in 90 days)		171,000
Office supplies		15,500
Automobiles		169,000
Accumulated depreciation—Automobiles				$	70,000
Equipment		148,000
Accumulated depreciation—Equipment					25,000
Land		86,000
Accounts payable					103,000
Interest payable					20,000
Salaries payable					18,000
Unearned fees					40,000
Long-term notes payable					150,000
Common stock					30,580
Retained earnings					275,220
Dividends		48,000
Fees earned					554,000
Interest earned					38,000
Depreciation expense—Automobiles		25,000
Depreciation expense—Equipment		18,000
Salaries expense		184,000
Wages expense		46,000
Interest expense		35,600
Office supplies expense		33,800
Advertising expense		59,500
Repairs expense—Automobiles		25,400
Totals	$	1,323,800		$	1,323,800

Required:
Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (b) the statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the prior year was $275,220]; and (c) the balance sheet as of December 31.

Required A Required B Required Prepare the income statement for the year ended December 31. CHIARA COMPANY Income Statement For Year Ended December 31 < Required A Required B

Answer 1

(a)

Chiara Company
Income Statement
For the year ended December 31
	$	$
Fees Earned	554,000.00
Interest Earned	38,000.00
Total Revenue		592,000.00
Less Expenses:
Depreciation expense-Automobiles	25,000.00
Depreciation expense-Equipment	18,000.00
Salaries expense	184,000.00
Wages Expenses	46,000.00
Interest expense	35,600.00
Office Supplies expenses	33,800.00
Advertising expense	59,500.00
Repairs expense-Automobiles	25,400.00
Total Expenses		427,300.00
Net Income		164,700.00

(b)

Chiara Company
Retained Earnings Statement
For Year Ended December 31
	$
Retained earnings, December 31, Prior year	275,220.00
Add: Net income	164,700.00
	439,920.00
Less: Dividends	(48,000.00)
Retained earnings, Dec.31, current year	391,920.00

(c)

Chiara Company
CLASSIFIED BALANCE SHEET
AS OF DECEMBER 31
	$	$
Assets
Current Assets
Cash	185,900.00
Accounts receivable	54,500.00
Interest receivables	18,600.00
Notes receivable (due in 90 days)	171,000.00
Office supplies	15,500.00
Total current assets		445,500.00
Property, plant and equipment
Automobiles	169,000.00
Less: Accumulated depreciation	(70,000.00)
	99,000.00
Equipment	148,000.00
Less: Accumulated depreciation	(25,000.00)
	123,000.00
Land	86,000.00
Net property, plant, and equipment (99000+123000+86000)		308,000.00
Total assets		753,500.00
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	103,000.00
Interest Payable	20,000.00
Salaries Payable	18,000.00
Unearned fees	40,000.00
Total current liabilities		181,000.00
Long-term liabilities
Notes payable		150,000.00
Total liabilities		331,000.00
Stockholders’ equity
Common stock	30,580.00
Retained earnings	391,920.00
Total stockholders’ equity		422,500.00
Total liabilities and stockholders’ equity		753,500.00