Financial Statement Preparation
Tutors for Rent, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The company's year-end adjusted trial balance dated December 31,2011, was:
TUTORS FOR RENT, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 | ||
Cash | $91,100 |
|
Accounts receivable | 4,500 |
|
Supplies | 300 |
|
Equipment | 12,000 |
|
Accumulated depreciation: equipment |
| $ 5,000 |
Accounts payable |
| 1,500 |
Income taxes payable |
| 3,500 |
Capital stock |
| 25,000 |
Retained earnings |
| 45,000 |
Dividends | 2,000 |
|
Tutoring revenue earned |
| 96,000 |
Salary expense | 52,000 |
|
Supply expense | 1,200 |
|
Advertising expense | 300 |
|
Depreciation expense: equipment | 1,000 |
|
Income taxes expense | 11,600 |
|
| $ 176,000 | $176,000 |
a. Prepare an income statement and statement of retained earnings for the year ended December 31,2011. Also prepare the company's balance sheet dated December 31,2011.
b. Does the company appear to be liquid? Defend your answer.
c. Has the company been profitable in the past? Explain.
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