Question

I TUDIUM 1. The adjusted trial balance of Debit Company is shown below: Debit Company Adjusted Trial Balance December 31, 20X7 Cash $6,500 Accounts receivable 8,000 Supplies 1,000 Prepaid Rent (3 months) 2,500 Equipment, net 42,000 Accounts payable Salary payable Unearned revenue (2 month advance) Note payable - long term Common stock Retained earnings- Dividends Service revenue Salary expense 40,000 Rent expense 10,000 Supplies expense Depreciation expense 5,000 Utilities expense 1,200 $4,000 2,000 2,000 14,000 10,000 14,700 4,000 75,000 1,500 $121,700 $121,700 Total * Assume 30% income tax rate Prepare Debit Company's income statement and statement of retained earnings for the year ended December 31, 20X7.

Create a balance sheet

Answer 1

Debit Company
Balance Sheet
As of December 31,20X7
Assets		Liabilities and stockholders' equity
Cash	$6,500	Accounts payable	$4,000
Accounts receivable	$8,000	Salary payable	$2,000
Supplies	$1,000	Unearned revenue	$2,000
Prepaid rent	$2,500	Note payable	$14,000
Equipment, net	$42,000	Total liabilities	$22,000
		Stockholders' equity:
		Common stock	$10,000
		Retained earnings	$28,000
		Total stockholders' equity	$38,000
Total Assets	$60,000	Total liabilities and stockholders' equity	$60,000

Calculations:

Income Statement
Revenues:
Service revenue		$75,000
Expenses:
Salary expense	$40,000
Rent expense	$10,000
Supplies expense	$1,500
Depreciation expense	$5,000
Utilities expense	$1,200
Total expenses		$57,700
Net income		$17,300

Retained earnings, Beginning	$14,700
Net income	$17,300
Less: Dividends	($4,000)
Retained earnings, Ending	$28,000