Question

B1 - The following is the trial balance of Star Company on December 31st, 2019: Star Company Trial Balance December 31st, 2019 Debit Credit $500,000 175,000 200,000 500,000 375,000 Cash Accounts Receivable Supplies Equipment Furniture Accounts Payable Star, Capital Star, Drawings $150,000 1,400,000 50,000 Service Revenue Salaries Expense Advertising Expense Rent Expense Utilities Expense 750,000 250,000 75,000 125,000 50,000 2,300,000 2,300,000 Total Required: Prepare the financial statements of Star Company on December 31st, 2019. [SK1: 5 marks]

Answer 1

The income statement for the year ending December 31, 2019 and balance sheet as on Dec 31, 2019 of Star Company are shown as follows:-

  STAR COMPANY

Income Statement

For The Year Ending Dec 31, 2019 (Amounts in $)

Service revenue (A)	750,000
Expenses:
Salaries expense	250,000
Advertising expense	75,000
Rent expense	125,000
Utilities expense	50,000
Total expenses (B)	500,000
Net Income (A-B)	250,000

Therefore net income of the company is $250,000 and this amount will be credited to capital account of owner.

STAR COMPANY

Balance Sheet

As On Dec 31, 2019 (Amounts in $)

Assets
Cash	500,000
Accounts receivable	175,000
Supplies	200,000
Equipment	500,000
Furniture	375,000
Total Assets	1,750,000
Liabilities and Owner's Equity
Accounts Payable	150,000
Owner's Capital:
Beginning Balance	1,400,000
Net Income	250,000
Drawings	(50,000)
Ending Balance	1,600,000
Total Liabilities and owner's equity	1,750,000