stark company has the following adjusted accounts with normal balances at its december 31 year - end. notes…
stark company has the following adjusted accounts with normal balances at its december 31 year - end. notes payable $25,000 accumulated depreciation - buildings $29,000 prepaid insurance 3,900 accounts receivable 6,800 interest expense 780 utilities expense 2,700 accounts payable 8,500 interest payable 660 wages payable 1,800 unearned revenue 1,500 cash 38,000 supplies expense 480 wages expense 8,900 buildings 180,000 insurance expense 3,200 dividends 10,000 common stock 24,000 depreciation expense - buildings 9,000 services revenue 90,000 supplies 1,500 retained earnings 84,800 exercise 3 - 17 (algo) preparing financial statements lo p5 use the adjusted accounts for stark company to prepare the (1) income statement and (2) statement of retained earnings for the year ended december 31 and (3) balance sheet at december 31. the retained earnings account balance was $84,800 on december 31 of the prior year. complete this question by entering your answers in the tabs below. income statement statement of retained earnings balance sheet
Answer
Explanation:
Step1: Calculate total revenues
Revenues consist of services revenue only here. So total revenues = $90,000$.
Step2: Calculate total expenses
Total expenses = Interest expense + Utilities expense+Wages expense + Insurance expense+ Supplies expense+ Depreciation expense - Buildings $=780 + 2700+8900 + 3200+480+9000=$25,060$.
Step3: Calculate net income for income statement
Net income = Revenues - Expenses = $90000 - 25060=$64,940$.
Step4: Calculate ending retained earnings for statement of retained earnings
Beginning retained earnings = $84,800$, dividends = $10,000$, net income = $64,940$. Ending retained earnings = Beginning retained earnings+Net income - Dividends = $84800 + 64940-10000=$139,740$.
Step5: Classify assets for balance - sheet
Current assets: Cash = $38,000$, Accounts receivable = $6,800$, Prepaid insurance = $3,900$, Supplies = $1,500$. Total current assets = $38000 + 6800+3900+1500=$40,200$. Non - current assets: Buildings = $180,000$, Accumulated depreciation - Buildings = $29,000$. Net buildings = $180000 - 29000=$151,000$. Total assets = Current assets+Net buildings = $40200+151000=$191,200$.
Step6: Classify liabilities for balance - sheet
Current liabilities: Accounts payable = $8,500$, Interest payable = $660$, Wages payable = $1,800$, Unearned revenue = $1,500$. Total current liabilities = $8500+660+1800+1500=$12,460$. Long - term liability: Notes payable = $25,000$. Total liabilities = Current liabilities+Long - term liability = $12460 + 25000=$37,460$.
Step7: Calculate stockholders' equity for balance - sheet
Common stock = $24,000$, Retained earnings = $139,740$. Total stockholders' equity = $24000+139740=$163,740$. Total liabilities and stockholders' equity = Total liabilities+Total stockholders' equity = $37460+163740=$191,200$ (matches total assets).
Income Statement
| Particulars | Amount |
|---|---|
| Services revenue | $90,000$ |
| Less: Expenses | |
| Interest expense | $780$ |
| Utilities expense | $2,700$ |
| Wages expense | $8,900$ |
| Insurance expense | $3,200$ |
| Supplies expense | $480$ |
| Depreciation expense - Buildings | $9,000$ |
| Total expenses | $25,060$ |
| Net income | $64,940$ |
Statement of Retained Earnings
| Particulars | Amount |
|---|---|
| Beginning retained earnings | $84,800$ |
| Add: Net income | $64,940$ |
| Less: Dividends | $10,000$ |
| Ending retained earnings | $139,740$ |
Balance Sheet
| Particulars | Amount |
|---|---|
| Assets | |
| Current assets | |
| Cash | $38,000$ |
| Accounts receivable | $6,800$ |
| Prepaid insurance | $3,900$ |
| Supplies | $1,500$ |
| Total current assets | $40,200$ |
| Non - current assets | |
| Buildings | $180,000$ |
| Less: Accumulated depreciation - Buildings | $29,000$ |
| Net buildings | $151,000$ |
| Total assets | $191,200$ |
| Liabilities and Stockholders' Equity | |
| Liabilities | |
| Current liabilities | |
| Accounts payable | $8,500$ |
| Interest payable | $660$ |
| Wages payable | $1,800$ |
| Unearned revenue | $1,500$ |
| Total current liabilities | $12,460$ |
| Long - term liability | |
| Notes payable | $25,000$ |
| Total liabilities | $37,460$ |
| Stockholders' equity | |
| Common stock | $24,000$ |
| Retained earnings | $139,740$ |
| Total stockholders' equity | $163,740$ |
| Total liabilities and stockholders' equity | $191,200$ |
Answer:
Income Statement: Net income = $64,940$ Statement of Retained Earnings: Ending retained earnings = $139,740$ Balance Sheet: Total assets = $191,200$, Total liabilities = $37,460$, Total stockholders' equity = $163,740$