Question

The adjusted trial balance for China Tea Company at December 31, 2018, is presented below 13 Debit Credit Cash 12,500 170,000 7,00e 45,e00 Accounts receivable Prepaid rent Inventory Equipment Accumulated depreciation equipment 15 points 500,000 145,000 5e,000 5e,eee 6,000 3,000 Accounts payable Notes payable- due in three months Salaries payable Interest payable 01:12:46 Common stock Retained earnings Sales revenue 300,000 94,000 600,000 280,000 Costs of goods sold Salaries expense 140,000 35,000 5e,000 4,000 4, 500 Rent expense Depreciation expense Interest expense Advertising expense 1,248,000 1,248,000 Totals

Answer 1

Ans.	CHINA TEA COMPANY
	Balance Sheet
	At December 31, 2018
		Amount	Amount
	Assets
	Current Assets:
	Cash	$12,500
	Accounts receivables	$170,000
	Prepaid rent	$7,000
	Inventory	$45,000
	Total current assets		$234,500
	Plant and equipment:
	Equipment	$500,000
	Less: Accumulated depreciation	-$145,000
	Net property, plant and equipment		$355,000
	Total assets		$589,500
	Liabilities
	Current Liabilities:
	Accounts payable	$50,000
	Notes payable	$50,000
	Salaries payable	$6,000
	Interest payable	$3,000
	Total current liabilities		$109,000
	Stockholder's equity:
	Common stock	$300,000
	Retained earnings	$180,500
	Total stockholder's equity		$480,500
	Total liabilities and owner's equity		$589,500
	*Notes payable due within three month's so it is a current liability because if a liability due within one year
	or less than one year it means it is a current liability.
	*Equipment is shown on net of depreciation amount.
WORKING      NOTES:
	*Calculations of Net income:
	Particulars	Amount	Amount
	Service fees earned	$600,000
	Total revenue (a)		$600,000
	Less: Expesnes:
	Cost of goods sold	$280,000
	Salaries expenses	$140,000
	Rent expenses	$35,000
	Depreciation expense	$50,000
	Interest expenses	$4,000
	Advertising expenses	$4,500
	Total expenses (b)		$513,500
	Net income (a - b)		$86,500
*Calculations of Ending Retained Earnings:
	Particulars	Amount
	Beginning balance of Retained earnings	$94,000
	Add: Net income	$86,500
	Less: Dividends paid	$0
	Ending balance of Retained earnings	$180,500