Question

The December 31, 2021, adjusted trial balance for the Blueboy Cheese Corporation is presented below. Credits Debits 68,500 250,000 5,000 35,000 450,000 Account Title Cash Accounts receivable Prepaid rent Inventory office equipment Accumulated depreciation Accounts payable Notes payable (due in six months) Salaries payable Interest payable Common stock Retained earnings Sales revenue Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense. Advertising expense Totals 190,000 40,000 15,000 6,000 500 400,000 70,000 600,eee 360,000 90,000 15,000 45,000 1,000 2,000 1,321,500 1,321,5ee Required: 1-a. Prepare an income statement for the year ended December 31, 2021. 1-b. Prepare a classified balance sheet as of December 31, 2021 2. Prepare the necessary closing entries at December 31, 2021

Answer 1

Income statement for the year ended Dec 31 2021

Particulars	Amount	Amount
Sales revenue		600000
Less: Cost of goods sold		(360000)
A) Gross profit		240000
B) Operating expenses :
Salaries expense	90000
Rent expense	15000
Depreciation expense	45000
Interest expense	1000
Advertising expense	2000	153000
Operating income (C)		0
Net income (A-B+C)		87000

Balance sheet as on dec 31,2021

Particular	Amount
Assets
Fixed assets
Office equipment	450000
Current assets
Cash	68500
Account receivable	250000
Prepaid rent	5000
Inventory	35000
Total assets	808500
Liabilities and shareholders equity
Common stock	400000
Retained earnings	70000
Accumulated depreciation	190000
Accounts payable	40000
Notes payable	15000
Salaries payable	6000
Interest payable	500
Net profit	87000
Total liabilities	808500

Journal entries for the year ended Dec 31,2021

Closing of revenue account

Date	General journal	Debit	Credit
31/12	Sales account Dr	600000
	To income summary		600000

Closing the expense account

Date	General journal	Debit	Credit
31/12	Income summary Dr	153000
	To salaries expense		90000
	To Rent expense		15000
	To Depreciation expense		45000
	To interest expense		1000
	To Advertisement expense		2000