Question

The adjusted trial balance for Tybalt Construction on December 31 of the current year follows. Credit $ 20,000 60,000 TYBALT CONSTRUCTION Adjusted Trial Balance December 31 No. Account Title Debit 101 Cash $ 8,000 104 Short-term investments 23,000 126 Supplies 9,300 128 Prepaid insurance 8,400 167 Equipment 40,000 168 Accumulated depreciation-Equipment 173 Building 180,000 174 Accumulated depreciation-Building 183 Land 57,600 201 Accounts payable 203 Interest payable 208 Rent payable 210 Wages payable 213 Property taxes payable 236 Unearned revenue 244 Current portion of long-term note payable 251 Long-term notes payable 307 Common stock 318 Retained earnings 319 Dividends 10,900 404 Services revenue 406 Rent revenue 407 Dividends revenue 409 Interest revenue 606 Depreciation expense-Building 13,200 612 Depreciation expense-Equipment 6,000 623 Wages expense 29,500 633 Interest expense 4,700 637 Insurance expense 9,400 640 Rent expense 11,600 652 Supplies expense 5,900 682 Postage expense 2,900 683 Property taxes expense 3,400 684 Repairs expense 8,100 688 Telephone expense 3,100 690 Utilities expense 3,600 Totals $438,600 15,000 2,200 3,200 2,300 800 7,700 8,500 63,000 8,000 122,900 103,000 17,000 2,300 2,700 $438,600

Oro Tybalt invested $8,000 cash in the business in exchange for common stock during the year. The Retained Earnings account balance was $122,900 on December 31 of the prior year.

Required:
1a. Prepare the income statement for the current year ended December 31.
1b. Prepare the statement of retained earnings for the current year ended December 31.
1c. Prepare the classified balance sheet at December 31.
2. Prepare the necessary closing entries at December 31 of the current year.
  

Answer 1

Requirement 1(a):

Income statement
For the year end December, 31 2020
Revenues:
Service revenue	$ 103,000
Rent revenue	$ 17,000
Dividends revenue	$ 2,300
Interest revenue	$ 2,700
Total revenues		$ 125,000
Expenses:
Depreciation expense-building	$ 13,200
Depreciation expense-equipment	$ 6,000
Wages expense	$ 29,500
Interest expense	$ 4,700
Insurance expense	$ 9,400
Rent expense	$ 11,600
Supplies expense	$ 5,900
Postage expense	$ 2,900
Property taxes expense	$ 3,400
Repairs expense	$ 8,100
Telephone expense	$ 3,100
Utilities expense	$ 3,600
Total expenses		$ 101,400
Net income		$ 23,600

Requirement 1(b):

Retained earnings statement
For the year ended December 31, 2020
Retained earnings	$ 122,900
Add: net income	$ 23,600
Less: Dividends	($ 10,900)
Retained earnings, ending	$ 135,600

Requirement 1(c):

Classified Balance Sheet
at December 31, 2020
Assets			Liabilities and Stockholders' equity
Current Assets:			Current liabilities:
Cash	$ 8,000		Accounts payable	$ 15,000
Short-term investments	$ 23,000		Interest payable	$ 2,200
Supplies	$ 9,300		Rent payable	$ 3,200
Prepaid insurance	$ 8,400		Wages payable	$ 2,300
Total current assets		$ 48,700	Property tax payable	$ 800
Property, plant and equipment:			Unearned revenue	$ 7,700
Equipment	$ 40,000		Total current liabilities		$ 31,200
Less: Accumulated depreciation-equipment	($ 20,000)		Long-term liabilities:
Building	$ 180,000		Current portion-notes payable	$ 8,500
Less: Accumulated depreciation-building	($ 60,000)		Long-term notes payable	$ 63,000
Land	$ 57,600		Total long-term liabilities		$ 71,500
Total property, plant and equipment		$ 197,600	Total liabilities		$ 102,700
			Stockholders' equity:
			Common stock	$ 8,000
			Retained earnings	$ 135,600
			Total stockholders' equity		$ 143,600
Total assets		$ 246,300	Total liabilities and stockholders' equity		$ 246,300

Requirement 2:

CLOSING ENTRIES
Date	Account title and explanation	Debit	Credit
Dec 31 2019	Service revenue	$ 103,000
	Rent revenue	$ 17,000
	Dividends revenue	$ 2,300
	Interest revenue	$ 2,700
	Income summary account		$ 125,000
	[To close revenue accounts]
Dec 31 2020	Income summary account	$ 101,400
	Depreciation expense-building		$ 13,200
	Depreciation expense-equipment		$ 6,000
	Wages expense		$ 29,500
	Interest expense		$ 4,700
	Insurance expense		$ 9,400
	Rent expense		$ 11,600
	Supplies expense		$ 5,900
	Postage expense		$ 2,900
	Property taxes expense		$ 3,400
	Repairs expense		$ 8,100
	Telephone expense		$ 3,100
	Utilities expense		$ 3,600
	[To close expense account]
Dec 31 2019	Income summary	$ 23,600
	Retained earnings		$ 23,600
	[To close income summary account]
Dec 31 2019	Retained earnings	$ 10,900
	Dividends		$ 10,900
	[To close dividends]