Question

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

	Debit			Credit
Cash	$	204,700
Accounts receivable		52,000
Interest receivable		21,400
Notes receivable (due in 90 days)		171,000
Office supplies		17,000
Automobiles		167,000
Accumulated depreciation—Automobiles				$	85,000
Equipment		140,000
Accumulated depreciation—Equipment					18,000
Land		77,000
Accounts payable					106,000
Interest payable					25,000
Salaries payable					25,000
Unearned fees					34,000
Long-term notes payable					154,000
Common stock					30,580
Retained earnings					275,220
Dividends		52,000
Fees earned					554,000
Interest earned					34,000
Depreciation expense—Automobiles		24,500
Depreciation expense—Equipment		19,500
Salaries expense		191,000
Wages expense		45,000
Interest expense		34,000
Office supplies expense		35,600
Advertising expense		61,500
Repairs expense—Automobiles		27,600
Totals	$	1,340,800		$	1,340,800

Required:
Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (b) the statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the prior year was $275,220]; and (c) the balance sheet as of December 31.

Prepare the income statement for the year ended December 31.

Answer 1

(a)

Chiara Company
Income Statement
For the year ended December 31
	$	$
Fees Earned	554,000.00
Interest Earned	34,000.00
Total Revenue		588,000.00
Less Expenses:
Depreciation expense-Automobiles	24,500.00
Depreciation expense-Equipment	19,500.00
Salaries expense	191,000.00
Wages Expenses	45,000.00
Interest expense	34,000.00
Office Supplies expenses	35,600.00
Advertising expense	61,500.00
Repairs expense-Automobiles	27,600.00
Total Expenses		438,700.00
Net Income		149,300.00

(b)

Chiara Company
Retained Earnings Statement
For Year Ended December 31
	$
Retained earnings, December 31, Prior year	275,220.00
Add: Net income	149,300.00
	424,520.00
Less: Dividends	(52,000.00)
Retained earnings, Dec.31, current year	372,520.00

(c)

Chiara Company
CLASSIFIED BALANCE SHEET
AS OF DECEMBER 31
	$	$
Assets
Current Assets
Cash	204,700.00
Accounts receivable	52,000.00
Interest receivables	21,400.00
Notes receivable (due in 90 days)	171,000.00
Office supplies	17,000.00
Total current assets		466,100.00
Property, plant and equipment
Automobiles	167,000.00
Less: Accumulated depreciation	(85,000.00)
	82,000.00
Equipment	140,000.00
Less: Accumulated depreciation	(18,000.00)
	122,000.00
Land	77,000.00
Net property, plant, and equipment (82000+122000+77000)		281,000.00
Total assets		747,100.00
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	106,000.00
Interest Payable	25,000.00
Salaries Payable	25,000.00
Unearned fees	34,000.00
Total current liabilities		190,000.00
Long-term liabilities
Notes payable		154,000.00
Total liabilities		344,000.00
Stockholders’ equity
Common stock	30,580.00
Retained earnings	372,520.00
Total stockholders’ equity		403,100.00
Total liabilities and stockholders’ equity		747,100.00