required:\n1. prepare an income statement for the year ended december 31, 2027.\n2. prepare a statement of…
required:\n1. prepare an income statement for the year ended december 31, 2027.\n2. prepare a statement of stockholders equity for the year ended december 31, 2027, assuming no common stock was issued and no dividends were declared during 2027.\n3. prepare a classified balance sheet as of december 31, 2027.\ncash accounts receivable prepaid rent supplies land accounts payable salaries payable interest payable notes payable (due in two years) common stock retained earnings service revenue salaries expense rent expense utilities expense interest expense\ndebit:\n$21,000 200,000 7,000 40,000 315,000\ncredit:\n$22,000 21,000 5,000 50,000 350,000 80,000 550,000\ntotals\n$1,078,000 $1,078,000
Answer
Explanation:
Step1: Calculate net income for income statement
Net income = Service Revenue - (Salaries Expense+Rent Expense+Utilities Expense+Interest Expense) Service Revenue = $410,000$, Salaries Expense = $30,000$, Rent Expense = $50,000$, Utilities Expense = $5,000$, Interest Expense = $5,000$ Net income = $410000-(30000 + 50000+5000 + 5000)$ Net income = $410000 - 90000$ Net income = $320,000$
Step2: Calculate retained earnings for stockholders' equity statement
Retained Earnings = Beginning Retained Earnings+Net Income - Dividends Since no dividends declared and no beginning - retained earnings information other than assuming it starts from $0$, Retained Earnings = $320,000$
Step3: Prepare classified balance sheet
Assets:
- Current Assets: Cash = $21,000$, Accounts Receivable = $200,000$, Prepaid Rent = $7,000$, Supplies = $40,000$ Current Assets Total = $21000+200000 + 7000+40000=268,000$
- Non - Current Assets: Land = $315,000$ Total Assets = $268000 + 315000=583,000$ Liabilities:
- Current Liabilities: Salaries Payable = $5,000$, Interest Payable = $5,000$, Accounts Payable = $50,000$ Current Liabilities Total = $5000+5000 + 50000=60,000$
- Non - Current Liabilities: Notes Payable (due in two years) = $350,000$ Total Liabilities = $60000+350000 = 410,000$ Stockholders' Equity: Common Stock = $80,000$, Retained Earnings = $320,000$ Total Stockholders' Equity = $80000+320000=400,000$ Total Liabilities and Stockholders' Equity = $410000 + 400000=583,000$
Income Statement for the year ended December 31, 2027
| Particulars | Amount |
|---|---|
| Service Revenue | $410,000$ |
| Less: Expenses | |
| Salaries Expense | $30,000$ |
| Rent Expense | $50,000$ |
| Utilities Expense | $5,000$ |
| Interest Expense | $5,000$ |
| Total Expenses | $90,000$ |
| Net Income | $320,000$ |
Statement of Stockholders' Equity for the year ended December 31, 2027
| Particulars | Amount |
|---|---|
| Common Stock | $80,000$ |
| Retained Earnings, Beginning | $0$ |
| Add: Net Income | $320,000$ |
| Less: Dividends | $0$ |
| Retained Earnings, Ending | $320,000$ |
| Total Stockholders' Equity | $400,000$ |
Classified Balance Sheet as of December 31, 2027
| Assets | Amount | Liabilities and Stockholders' Equity | Amount |
|---|---|---|---|
| Current Assets | Current Liabilities | ||
| Cash | $21,000$ | Salaries Payable | $5,000$ |
| Accounts Receivable | $200,000$ | Interest Payable | $5,000$ |
| Prepaid Rent | $7,000$ | Accounts Payable | $50,000$ |
| Supplies | $40,000$ | Total Current Liabilities | $60,000$ |
| Total Current Assets | $268,000$ | Non - Current Liabilities | |
| Non - Current Assets | Notes Payable (due in two years) | $350,000$ | |
| Land | $315,000$ | Total Non - Current Liabilities | $350,000$ |
| Total Assets | $583,000$ | Total Liabilities | $410,000$ |
| Stockholders' Equity | |||
| Common Stock | $80,000$ | ||
| Retained Earnings | $320,000$ | ||
| Total Stockholders' Equity | $400,000$ | ||
| Total Liabilities and Stockholders' Equity | $583,000$ |
Answer:
Income Statement, Statement of Stockholders' Equity and Classified Balance Sheet are prepared as above.