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Problem 3-5A Preparing financial statements from the adjusted trial balance and computing profit margin LO P3, A1, A2

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The adjusted trial balance for Chiara Company as of December 31, 2017, follows.

	Debit			Credit
Cash	$	180,100
Accounts receivable		50,500
Interest receivable		21,600
Notes receivable (due in 90 days)		170,500
Office supplies		15,500
Automobiles		168,000
Accumulated depreciation—Automobiles				$	50,000
Equipment		136,000
Accumulated depreciation—Equipment					18,000
Land		87,000
Accounts payable					102,000
Interest payable					45,000
Salaries payable					24,000
Unearned fees					28,000
Long-term notes payable					152,000
Common stock					30,580
Retained earnings					275,220
Dividends		48,000
Fees earned					554,000
Interest earned					38,000
Depreciation expense—Automobiles		27,500
Depreciation expense—Equipment		18,000
Salaries expense		189,000
Wages expense		39,000
Interest expense		37,000
Office supplies expense		34,800
Advertising expense		64,500
Repairs expense—Automobiles		29,800
Totals	$	1,316,800		$	1,316,800

Problem 3-5A Part 1

Required:
1(a) Prepare the income statement for the year ended December 31, 2017.
1(b) Prepare the statement of retained earnings for the year ended December 31, 2017.
1(c) Prepare Chiara Company's balance sheet as of December 31, 2017.
  

Problem 3-5A Part 2

2. Calculate the profit margin for year 2017.

Problem 3-5A Part 2

Answer 1

Income statement
For the year ended dec 31
Revenues
Fees earned	554,000
Interest earned	38,000
total revenues		592000
Expenses
Depreciation expense—Automobiles	27,500
Depreciation expense—Equipment	18,000
Salaries expense	189,000
Wages expense	39,000
Interest expense	37,000
Office supplies expense	34,800
Advertising expense	64,500
Repairs expense—Automobiles	29,800
Total expenses		439,600
Net income		152,400
Retained earnings
For the year ended dec 31
Retained earnings dec 31, Year 1		275,220
Add:Net income		152,400
		427620
Less:Dividends		48,000
Retained earnings dec 31, Year 2		379620

Balance sheet
Dec-31
Cash		180,100
Accounts receivable		50,500
Interest receivable		21,600
Notes receivable (due in 90 days)		170,500
Office supplies		15,500
Automobiles	168,000
Accumulated depreciation—Automobiles	-50,000	118,000
Equipment	136,000
Accumulated depreciation—Equipment	-18,000	118,000
Land		87,000
total assets		761,200
Liabilities
Accounts payable		102,000
Interest payable		45,000
Salaries payable		24,000
Unearned fees		28,000
Long-term notes payable		152,000
total liabilities		351,000
Equity
Common stock	30,580
Retained earnings	379620
total equity		410,200
Total liabilities & equity		761,200