Question

Green Valley Company prepared the following trial balance at the end of its first year of operations ending December 31. To simplify the case, the amounts given are in thousands of dollars. UNADJUSTED Debit Credit 34 31 26 93 27 Account Titles Cash Accounts receivable Prepaid insurance Machinery Accumulated depreciation Accounts payable Wages payable Income taxes payable Common stock (9,000 shares) Additional paid-in capital Retained earnings Revenues not detailed) Expenses (not detailed) Totals 9 73 25 141 41 250 250 Other data not yet recorded at December 31 include a. Insurance expired during the current year, $11. b. Wages payable, $15. c. Depreciation expense for the current year, $17. d. Income tax expense, $10. Required: 1. Using the adjusted balances, prepare an income statement for the current year. 2. Using the adjusted balances, prepare statement of stockholders' equity for the current year. The balance in retained earnings represents dividends that were declared and paid in the current year. 3. Using the adjusted balances, prepare balance sheet for the current year.

Answer 1

1. Preparation of Income Statement:

Expenses = Expenses (not detailed) + Insurance expired + Wages Payable + Depreciation Expense

= $41 + $11 + $15 + $17

= $84

GREEN VALLEY COMPANY
Income Statement
For the year ended December 31 (in thousands of dollars)
Particulars	Amount ($)
Revenue (not detailed)	141
Less: Expenses	84
Profit before tax	57
Less: Income tax expense	10
Profit after tax	47

2. Preparation of Statement of Stockholders' Equity:

GREEN VALLEY COMPANY
Statement of Stockholders' Equity
For the year ended December 31 (in thousands of dollars)
Particulars	Common Stock	Additional Paid-in Capital	Retained Earnings	Total Stockholders' Equity
Beginning Balances	0	0	0	0
Stock Issued	9	73	-	82
Net Income	-	-	47	47
Dividend Declared	-	-	(25)	(25)
Ending Balances	9	73	22	104

3. Preparation of Balance Sheet:

Prepaid Insurance = $26 - $11 = $15

Accumulated Depreciation = $17

Wages Payable = $15

Income tax payable = $10

GREEN VALLEY COMPANY
Income Statement
For the year ended December 31 (in thousands of dollars)
Assets	Amount ($)	Liabilities and Stockholders' Equity	Amount ($)
Current Assets		Current Liabilities
Cash	34	Accounts payable	27
Accounts Receivable	31	Wages Payable	15
Prepaid Insurance	15	Income tax payable	10
Non-Current Assets		Total Liabilities	52
Machinery	93	Stockholders' Equity
Accumulated Depreciation	(17)	Common Stock (9,000 shares)	9
		Additional Paid-in Capital	73
		Retained Earnings	22
		Total Stockholders' Equity	104
Total Assets	156	Total Liabilities and Stockholders' Equity	156