Question

QUESTION 3:

Holy cross Industries perform adjusting entries every month, but close its accounts only at year
end. The Agency’s year -end adjusted Trial Balance dated December 31, 2018, appears below.

DATA

Accounts Payable	57,000
Accounts Receivable	34,000
Building	255,000
Cash	15,000
Equipment	76,000
Loan from bank	320,000
Prepaid Expenses	12,000
Sales	123,000
Salary Expense	22,000
Utility Expense	8,000
Long-term liability	35,000
Trademarks	6,000
Short-term Notes Payable	44,000
Interest Expenses	4,500
Inventory	82,000
Cost of Goods Sold	62,000
Income Tax Expense	4,500

Prepare an Income Statement for the year ended December 31, 2018. Also prepare Holy cross Industries balance sheet dated December 31, 2018.

Answer 1

Income statement for the year ended December 31, 2018,

PARTICULARS	AMOUNT
​​​​​​INCOME:
Sales	123,000
EXPENSE:
Cost of goods sold	62,000
Interest expense	4,500
Salary expense	22,000
Utility Expense	8,000
Income tax expense	4,500
NET INCOME	22,000

Balance sheet dated December 31, 2018

EQUITY AND LIABILITIES	AMOUNT	ASSETS	AMOUNT
Accounts payable	57,000	Accounts receivable	34,000
Loan from bank	320,000	Cash	15,000
Long term Liability	35,000	Building	255,000
Short term notes payable	44,000	Equipment	76,000
Retained earnings	22,000	Prepaid expenses	12,000
Capital fund	2,000	Trademarks	6,000
		Inventory	82,000
	480,000		480,000

There is a difference of 2,000 in the trial balance provided which is assumed to be capital fund, as any business balance sheet cannot exist without capital fund.