Question

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

Answer 1

1.

Star Company
Income Statement
For the year ended December 31, 2019
Service revenue		$   750,000
Less: Expenses
Salaries expense	$   250,000
Advertising expense	$     75,000
Rent expense	$   125,000
Utilities expense	$     50,000
Total expenses		$   500,000
Net income		$   250,000

2.

Star Company
Statement of Owners Equity
For the year ended December 31, 2019
Star, Capital, Beginning	$   1,400,000
Add: net income	$      250,000
Less: Drawings	$      (50,000)
Star, Capital, Ending	$   1,600,000

3.

Star Company
Balance Sheet
As at December 31, 2019
Assets
Current assets
Cash	$   500,000
Accounts receivable	$   175,000
Supplies	$   200,000
Current assets		$      875,000
Property, Plant and Equipment
Equipment	$   500,000
Furniture	$   375,000
Total Property, Plant and Equipment		$      875,000
Total assets		$   1,750,000
Liabilities and owners equity
Current liabilities
Accounts payable		$      150,000
Owners Equity		$   1,600,000
Total liabilities and owners equity		$   1,750,000

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