Question

The December 31, 2021, adjusted trial balance for the Pink Petal Corporation is presented below.

Account Title	Debits	Credits
Accounts payable		66,000
Accounts receivable	315,000
Accumulated depreciation		238,000
Advertising expense	4,400
Cash	36,100
Common stock		400,000
Cost of goods sold	432,000
Depreciation expense	57,000
Interest expense	3,400
Interest payable		1,700
Inventory	47,000
Notes payable (due in six months)		51,000
Office equipment	570,000
Prepaid rent	11,500
Rent expense	34,500
Retained earnings, January 1, 2021		135,000
Salaries expense	108,000
Salaries payable		7,200
Sales revenue		720,000
Totals	1,618,900	1,618,900

1. Calculate Net Income for the year ending December 31, 2021.

2. Calculate Total Assets to be reported as of December 31, 2021.

3. Calculate Total Shareholders’ Equity to be reported as of December 31, 2021.

Answer 1

Income statement

For the year ended December 31, 2021

Sales revenue		720,000
Expenses:
Cost of goods sold	432,000
Advertising expense	4,400
Depreciation expense	57,000
Salaries expense	108,000
Rent expense	34,500
Interest expense	3,400
Total expenses		- 639,300
Net income		$80,700

Statement of Retained Earnings

As at December 31, 2021

Retained Earnings, beginning	135,000
Net income	80,700
Retained Earnings, ending	215,700

Balance sheet

As at December 31, 2021

Assets
Current assets
Cash	36,100
Accounts receivables	315,000
Inventory	47,000
Prepaid rent	11,500
Total current assets		409,600
Plant assets
Equipment	570,000
Less: Accumulated depreciation	- 238,000
Total Plant assets		332,000
Total assets		741,600
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	66,000
Interest payable	1,700
Notes payable (due in six months)	51,000
Salaries payable	7,200
Total Current liabilities		125,900
Stockholders’ Equity
Common stock	400,000
Retained Earnings	215,700
Total Stockholders’ equity		615,700
Total liabilities and equity		741,600

Net Income for the year ending December 31, 2021 = $80,700

Total Assets to be reported as of December 31, 2021 = $741,600

Total Shareholders’ Equity to be reported as of December 31, 2021 = $615,700

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