Question

Tunstall, Inc., a small service company, keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31:

Account Titles	Debit	Credit
Cash	42,000
Accounts receivable	11,600
Supplies	900
Prepaid insurance	800
Service trucks	19,000
Accumulated depreciation		9,200
Other assets	8,300
Accounts payable		3,000
Wages payable
Income taxes payable
Note payable (3 years; 10% interest due each December 31)		17,000
Common stock (5,000 shares outstanding)		400
Additional paid-in capital		19,000
Retained earnings		6,000
Service revenue		61,360
Remaining expenses (not detailed; excludes income tax)	33,360
Income tax expense
Totals	115,960	115,960

Data not yet recorded at December 31 included:

1. The supplies count on December 31 reflected $300 in remaining supplies on hand to be used in the next year.

2. Insurance expired during the current year, $800.

3. Depreciation expense for the current year, $3,700.

4. Wages earned by employees not yet paid on December 3, $640.

5. Income tax expense, $5,540.

Problem: Prepare an income statement and a classified balance sheet that include the effects of the preceding five transactions.

Answer 1

TUNSTALL, INC.
Income Statement
For the Year Ended December 31
Operating revenue:
Service revenue		$ 61,360.00
Operating expenses:
Insurance expense	$        800.00
Supplies expense	$        600.00
Wages expense	$        640.00
Depreciation expense	$    3,700.00
Remaining expenses (not detailed)	$ 33,360.00
Total expenses		$ 39,100.00
Income tax		$    5,540.00
Net income		$ 16,720.00
Earnings per share		$            3.34

TUNSTALL, INC.
Balance Sheet
As on december 31
Assets
Current Assets
Cash	$ 42,000.00
Accounts Receivable	$ 11,600.00
Supplies	$        300.00
Total Current Assets		$      53,900.00
Service Trucks (net of Depreciation)	$    6,100.00
Other Assets	$    8,300.00
Total Assets		$      68,300.00
Liabilities
Current Liabilities
Accounts Payable	$    3,000.00
Accrued Wages Payable	$        640.00
Income tax Payable	$    5,540.00
Total Current Liabilities		$        9,180.00
Note Payable	$ 17,000.00
Total Liabilities		$      26,180.00
Stockholders Equity
Capital	$ 19,400.00
Retained Earnings	$ 22,720.00
Total Liabilities and Stockholders Equity		$      68,300.00