Question

Required information

The general ledger of Red Storm Cleaners at January 1, 2021, includes the following account balances:

Accounts	Debits				Credits
Cash	$	10,500
Accounts Receivable		6,100
Supplies		2,100
Equipment		19,500
Accumulated Depreciation					$	6,800
Salaries Payable						9,300
Common Stock						15,500
Retained Earnings						6,600
Totals	$	38,200			$	38,200

The following is a summary of the transactions for the year:

1.		March		12		Provide services to customers, $41,000, of which $19,100 is on account.
2.		May		2		Collect on accounts receivable, $16,100.
3.		June		30		Issue shares of common stock in exchange for $6,000 cash.
4.		August		1		Pay salaries of $9,300 from 2020 (prior year).
5.		September		25		Pay repairs and maintenance expenses, $11,100.
6.		October		19		Purchase equipment for $6,100 cash.
7.		December		30		Pay $1,100 cash dividends to stockholders.

Prepare the income statement for the year ended December 31, 2021.

Prepare the classified balance sheet for the year ended December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

a)

Red Storm Cleaners Income statement for the year ended December 31 2021
Service revenue	41000
less:
repairs and maintenance expenses	-11100
Net Operating income	29900

b)

Red Storm Cleaners Balance sheet As on December 31 2021
ASSETS
Cash	26900
Accounts receivable	9100
Supplies	2100
Total current asset		38100
Non current asset
Equipment (19500+6100)	25600
Accumulated depreciation	(6800)	18800
Total asset		56900
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities		0
Stockholders equity
Common stock (15500+6000)	21500
Retained earning	35400
Total stockholders equity		56900
Total liabilities and stockholders equity		56900

Working:

Cash Balance :Beginning Balance + cash revenue +collection of receivables + sale of common stock - payment to suppliers- payment for expense -payment for equipment purchase- dividend paid

           = 10500 +[41000-19100] +16100+6000 -9300-11100-6100-1100

            =26900

Accounts receivable = beginning +credit revenue -collections

                = 6100 +19100-16100

               = 9100

Retained earning :Beginning +net income-dividend

         = 6600+29900-1100

           = 35400