Question

6. (10 points) Preparing financial statements from an adjusted trial balance. North Star Inc. Adjusted Trial Balance 31-Dec-18 Debit Credit 185,000 14,250 Cash Accounts Receivable Allowance for Doubtful Accounts Inventory (as of 12/31/18) Supplies Equipment Accumulated Deperciatbn - Equipment Building Accumulated Deperciatbn- Building Land Accounts Payable Salaries and Wages Payable Mortgage Payable Common Stock $0.10 APIC Retained Earnings Sales Revenue COGS Selling Expenses Administrative Expenses Income Tax Expense 48,000 2,400 275,000 180,000 355,000 195,000 275,000 29,500 4,500 125,000 1,000 145,000 84,000 1,285,000 289,300 245,000 $ 286,000 75,000 2,049,9502,049,950 Required: 1. Prepare the Income Statement (Multiple Step Format) 2. Prepare the Statement of Retained Earnings 3. Prepare the Balance Sheet (Classified Format) 4. Prepare the necessary year-end closing entries 5. Prepare the Year End Trial Balance

Answer 1

Answers

• Requirement 1

Income Statement
for the year ended 31 Dec 18
Sales revenue		$1,285,000
COGS		$289,300
Gross Profits		$995,700
Operating Expenses:
Selling Expenses	$245,000
Administrative expense	$286,000
Total Operating Expenses		$531,000
Operating Income - Net Income before income taxes		$464,700
Income Tax Expenses		$75,000
Net Income		$389,700

• Requirement 2

Statement of Retained earnings
for the year ended 31 Dec 18
Beginning Retained Earnings		$84,000
Add: Net Income	$389,700
Less: Dividends	$0
		$389,700
Ending Retained Earnings		$473,700

• Requirement 3

Balance Sheet
as at 31 Dec 2018
ASSETS
Current Assets:
Cash	$185,000
Accounst receivables	$14,250
Allowance for Doubtful Accounts	($950)
Inventory	$48,000
Supplies	$2,400
Total Current Assets		$248,700
Property, Plant & Equipment:
Land		$275,000
Equipment	$275,000
Accumulated Depreciation - Equipment	($180,000)	$95,000
Building	$355,000
Accumulated Depreciation - Building	($195,000)	$160,000
Total Property, Plant & Equipment		$530,000
Total Assets		$778,700
LIABILITIES
Current Liabilities:
Accounts Payable	$29,500
Salaries & Wages Payable	$4,500
Total Current Liabilities		$34,000
Mortgage Payable		$125,000
Total Liabilities		$159,000
STOCKHOLDER's EQUITY
Common Stock	$1,000
APIC	$145,000
Retained Earnings	$473,700
Total Stockholder's Equity		$619,700
Total Liabilities & Stockholder's Equity		$778,700

• Requirement 4

Closing Entry #	Accounts title	Debit	Credit
#1	Sales revenue	1285000
	Income Summary		1285000
	(revenue closed)
#2	Income Summary	895300
	COGS		289300
	Selling Expenses		245000
	Administrative expense		286000
	Income Tax Expenses		75000
	(expenses closed)
#3	Income Summary	389700
	Retained Earnings		389700
	(Net Income closed)

• Requirement 5

Post Closing - Year end closing Trial balance
Accounts title	Debit	Credit
Cash	$185,000
Accounst receivables	$14,250
Allowance for Doubtful Accounts		$950
Inventory	$48,000
Supplies	$2,400
Equipment	$275,000
Accumulated Depreciation - Equipment		$180,000
Building	$355,000
Accumulated Depreciation - Building		$195,000
Land	$275,000
Accounts Payable		$29,500
Salaries & Wages Payable		$4,500
Mortgage Payable		$125,000
Common Stock		$1,000
APIC		$145,000
Retained Earnings		$473,700
TOTAL	$1,154,650	$1,154,650