Question

Question 2: The following balances appear in the 31st December 2016 Balance Sheet of Shing Company: Cash $40,000, Accounts Receivables $8,500, Inventory $5,300, Property $8,000, Accounts Payable $3,500, Accrued liabilities $700, Common Stock $15,000, Retained earnings $?. The following events occurred during 2017: 1. The company sold $1,300 worth of inventory for the price of $7,000. 2. The company's owner sold 500 common stock to a well-known businessman for the amount of $1,200. 3. On April 1, The Company signed a contract for the purchase of web marketing ads for a period of 12 months. The company paid in advance for the whole period an amount of $3,000. The company purchased, on account, 20 units of inventory for $500 each. 5. On July 1, The Company purchased a vehicle for the CEO for $14,000. The vehicle is depreciated on a straight line basis for 7 years. One of the company's customers prepaid in cash $5,000 for a product the company will supply during 2018. 7. On October 1, The Company took a $30,000 loan from the bank that is due back on December 31 2018. The company paid the bank an amount of $1,000 interest on December 31 2017 for the period from October 1 December 31 2017. At year-end, the company realizes it should create an allowance for doubtful accounts (which did not exist before) for $600. 9. The company's management decided to give its owners a dividend for the total amount of $2,000. The dividend will be paid during 2018. 10. Assume there is no tax expense for the company. Unless mentioned otherwise, assume that the transaction is in cash. The company had no other transactions during the year. Required: A. What was the balance of Retained Earnings on 31 December 2016? B. Record the transactions above using journal entries. C. Prepare the Income Statement for the year ended December 31, 2017. D. Prepare the Balance Sheet as of December 31, 2017.

NO written work

Answer 1

A. Balance of retained earnins on December 31, 2016

= $ 42,600

B. Journal entries of above transactions

Transaction / Event	Account Titles	Debit	Credit
		$	$
1.	Cash	7,000
	Sales Revenue		7,000
	Cost of Goods Sold	1,300
	Inventory		1,300
2.	Cash	1,200
	Common Stock		500
	Paid-in Capital in Excess of Par		700
3.	Advance to Suppliers	3,000
	Cash		3,000
4.	Inventory	10,000
	Accounts Payable		10,000
5.	Vehicle	14,000
	Cash		14,000
6.	Cash	5,000
	Unearned Revenue		5,000
7.	Cash	30,000
	Bank Loan Payable		30,000
	Interest Expense	1,000
	Cash		1,000
8.	Bad Debt Expense	600
	Allowance for Doubtful Accounts		600
9.	Dividends	2,000
	Dividends Payable		2,000

C. Income statement for the year ended 31 december 2017

Income Statement For the year ended December 31, 2017
Sales Revenue		$ 7,000
Cost of Goods Sold		1,300
Gross Profit		5,700
Operating Expenses
Depreciation Expense	1,000
Bad Debt Expense	600
Interest Expense	1,000	2,600
Net Income		3,100

D. Balancesheet as on 31 december 2017

Balance Sheet December 31, 2017
Assets	$	Liabilities and Stockholders' Equity	$
Cash	65,200	Accounts Payable	13,500
Accounts Receivable, net	7,900	Unearned Revenue	5,000
Inventory	14,000	Dividends Payable	2,000
Advance to Suppliers	3,000	Bank Loan Payable	30,000
		Accrued Liabilities	700
Property	8,000	Common Stock	15,500
Vehicle, net	13,000	Paid-in Capital in Excess of Par	700
		Retained Earnings	43,700
Total Assets	111,100	Total Liabilities and Stockholders' Equity	111,100