Question

The adjusted trial balance of Parsons Company at December 31, 2020, includes the following accounts: Common Stock $15,600, Dividends $7,000, Service Revenue $37,000, Salaries and Wages Expense $16,000, Insurance Expense $2,000, Rent Expense $4,000, Supplies Expense $1,500, and Depreciation Expense $1,300. The balance in Common Stock is the balance as of January 1. Prepare a retained earnings statement for the year assuming net income is $12,200 for the year and Retained Earnings is $7,240 on January 1. (List items that increase owner's equity first.) Parsons Company Retained Earnings Statement

Answer 1

PARSONS COMPANY Retained Eaming statement! for the year Ended December 31 Retained Earning an odd: Net Income 7240 12,200 19,440 (7,000) 11,440 Less: Dividends Retained Earning Dec. 31 (2] promo Industries (a) cash basis net Income ls 33000 Explanation - In the cash basis method revenue is recognised when cash is received and expense is recognised when cash is paid - Here cash received cRevenue) cash para ( Expense) Net Income FIOSooo. (+2000) $ 33,000 (6) Accrual basis net income $36000 > Accoual basis is a method of accounting where laevenue is recorded when it is eamea expense is recordeod when it is incurred.

calculation 0 Revenue [s 10 5000 - 25000 + $ 40000) B12 Expense [ $ 72000 - $30,000 + $ 42000) Net Income 30,000 + $ 42000 84000) $ | 36000