Requirement 1:
Unadjusted | Adjustments | Adjusted | Income Statement | Balance Sheet | ||||||
Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | Debit | Credit | |
Cash | 51,760 | 51,760 | 51,760 | |||||||
Accounts receivable | 21,000 | 21,000 | 21,000 | |||||||
Supplies | 0 | 340 | 340 | 340 | ||||||
Prepaid rent | 0 | 700 | 700 | 700 | ||||||
Inventory | 48,000 | 48,000 | 48,000 | |||||||
Office equipment | 59,000 | 59,000 | 59,000 | |||||||
Accumulated depreciation | 7,670 | 7,375 | 15,045 | 15,045 | ||||||
Accounts payable | 22,200 | 22,200 | 22,200 | |||||||
Salaries payable | 2,400 | 3,600 | 6,000 | 6,000 | ||||||
Interest payable | 0 | 920 | 920 | 920 | ||||||
Notes payable | 27,600 | 27,600 | 27,600 | |||||||
Common stock | 60,000 | 60,000 | 60,000 | |||||||
Retained Earnings | 13,100 | 13,100 | 13,100 | |||||||
Dividends | 4,500 | 4,500 | 4,500 | |||||||
Sales revenue | 195,000 | 195,000 | 195,000 | |||||||
Cost of goods sold | 102,500 | 102,500 | 102,500 | |||||||
Interest expense | 0 | 920 | 920 | 920 | ||||||
Salaries expense | 25,150 | 3,600 | 28,750 | 28,750 | ||||||
Rent expense | 10,400 | 700 | 9,700 | 9,700 | ||||||
Supplies expense | 1,360 | 340 | 1,020 | 1,020 | ||||||
Utility expense | 4,300 | 4,300 | 4,300 | |||||||
Depreciation expense | 7,375 | 7,375 | 7,375 | |||||||
Totals | 327,970 | 327,970 | 339,865 | 339,865 | 154,565 | 195,000 | 185,300 | 144,865 | ||
Net income | 40,435 | 40,435 | ||||||||
195,000 | 195,000 | 185,300 | 185,300 |
*Interest expense to be calculated for 4 months (Aug 31 to Dec.31). Interest expense = $27,600 x 10% x (4/12) = 920
*Depreciation expense = $59,000/8 yeas = $7,375
Requirement 2a:
Income Statement | ||
For the year ended December 31,2021 | ||
Revenues: | ||
Sales revenue | 195,000 | |
Expenses: | ||
Cost of goods sold | 102,500 | |
Interest expense | 920 | |
Salaries expense | 28,750 | |
Rent expense | 9,700 | |
Supplies expense | 1,020 | |
Utility expense | 4,300 | |
Depreciation expense | 7,375 | |
Total Expenses | 154,565 | |
Net income | 40,435 |
Requirement 2b:
Statement of stockholders' equity | |||
For the year ended December 31,2021 | |||
Common stock | Retained earnings | Total | |
Beginning balance | 60,000 | 13,100 | 73,100 |
Net income | 40,435 | 40,435 | |
Dividends | -4,500 | -4,500 | |
Ending balance | 60,000 | 49,035 | 109,035 |
Requirement 2c:
Balance Sheet | |||
For the year ended December 31,2021 | |||
Assets | Liabilities and stockholders' equity | ||
Cash | 51,760 | Accounts payable | 22,200 |
Accounts receivable | 21,000 | Salaries payable | 6,000 |
Supplies | 340 | Interest payable | 920 |
Prepaid rent | 700 | Notes payable | 27,600 |
Inventory | 48,000 | Total liabilities | 56,720 |
Office equipment | 59,000 | Stockholders' equity: | |
Accumulated depreciation | -15,045 | Common stock | 60,000 |
Retained Earnings | 49,035 | ||
Total stockholders' equity | 109,035 | ||
Total Assets | 165,755 | Total liabilities and stockholders' equity | 165,755 |
Requirement 3:
Date | Account title and explanation | Debit | Credit |
12/31/2021 | Sales revenue | 195,000 | |
Income Summary | 195,000 | ||
[To close revenue accounts] | |||
12/31/2021 | Income Summary | 154,565 | |
Cost of goods sold | 102,500 | ||
Interest expense | 920 | ||
Salaries expense | 28,750 | ||
Rent expense | 9,700 | ||
Supplies expense | 1,020 | ||
Utility expense | 4,300 | ||
Depreciation expense | 7,375 | ||
[To close expenses accounts] | |||
12/31/2021 | Income summary | 40,435 | |
Retained earnings | 40,435 | ||
[To close income summary account] | |||
12/31/2021 | Retained earnings | 4,500 | |
Dividends | 4,500 | ||
[To close dividends account] |
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