Question

Company had the following account balances, in random order, on December 31, 2020.

Equipment	50000		Land	150000
Drawings	2000		Accumulated depreciation - building	300000
Salaries expense	20000		Cash	24500
Service revenue	140200		Capital	464200
Rent expense	3000		Prepaid expense	5000
Unearned service revenue	2500		Accounts receivable	26000
Insurance expense	1500		Depreciation expense - equipment	2000
Interest revenue	5000		Utilities expense	4000
Notes payable	55000		Salaries payable	4500
Accounts payable	4600		Accumulated depreciation - equipment	20000
Building	700000		Depreciation expense - building	8000

Additional Information:

• During the year, Sam Chiang invested $15,000 into the business.
• $7,500 of the notes payable is due this year.

Required:

1. Prepare an income statement for the company for the year ended December 31, 2020.
2. Prepare a statement of owner’s equity for the company for the year ended December 31, 2020.
3. Prepare a classified balance sheet at December 31, 2020.

1. Prepare income statement

2. Prepare statement of owner’s equity

3. Prepare balance sheet

Answer 1

Requirement:1

Company [Sam Chiang]
Income statement
For the Year Ended December 31, 2020
Revenue
Sales		$       140,200
Interest Revenue		$           5,000
Total Revenue (A)		$       145,200
Expenses:
Salaries expense	$                  20,000
Rent expense	$                    3,000
Insurance expense	$                    1,500
Depreciation expense-Equipment	$                    2,000
Depreciation expense-Building	$                    8,000
Utilities expense	$                    4,000
Total Expense (B)		$         38,500
Net Income (A-B)		$       106,700

Requirement:2

Company [Sam Chiang]
Owner`s Equity Statement
For the Year Ended December 31, 2020
Owner`s Equity At Beginning [464200-15000]		$ 449,200
Add: Owner`s Investment	$              15,000
Net Income	$            106,700	$ 121,700
SubTotal		$ 570,900
Deduct: Owner`s Drawings		$     (2,000)
Owner`s Equity At December 31,2020		$ 568,900

Requirement:3

Company [Sam Chiang]
Balance sheet
For the Year Ended December 31, 2020
Assets			Liabilities
Current assets:			Current liabilities:
Cash		$        24,500	Account Payable	$               4,600
Accounts Receivable		$        26,000	Salaries payable	$               4,500
Prepaid Expense		$          5,000	Unearned Service Revenue	$               2,500
			Notes payable [Short term]	$               7,500
Total current assets		$        55,500	Total current liabilities	$            19,100
Property,plant, and equipment:			Long term liabilities
Land		$     150,000	Notes payable [55000-7500]	$            47,500
Equipment	$         50,000		Total long term Liabilities	$            47,500
Less: Accumulated Depreciation	$      (20,000)		Owner`s Equity
Net Equipment		$        30,000	Sam Chiang, Capital	$          568,900
Building	$      700,000
Less: Accumulated Depreciation	$    (300,000)
Net Building		$     400,000
Total Long-term assets		$     580,000	Total stockholders` equity	$          568,900
Total Assets		$     635,500	Total liabilties and stockholders` equity	$          635,500