Question

The following balances are taken from the Trial Balance of Alpha Corp as of December 31, 2018:

Cash               $19,000               Accounts Receivable   $ 8,000

Accounts Payable          5,500                   Equipment       25,000

Interest Income           500                   Prepaid Insurance   2,500

Accumulated Depreciation      10,000               Common Stock       20,000

Notes Payable (due in 2019)      7,000                   Salaries Expense   28,000

Retained Earnings (beginning)   39,600                   Salaries Payable       6,000

Sales               120,000               Supplies        3,000

Sales Discounts              5,000                   Supplies Expense   2,400

Utilities Expense          4,200                   Cost of Goods Sold   65,000

Inventory              35,000                   Deferred Revenue   3,500

Dividends              10,000                   Depreciation Expense   5,000

Additional Information:

Common Stock

Authorized shares – 50,000

Issued and outstanding shares at 12/31/18 – 20,000

Par value - $1 per share

5,000 shares issued in 2018

Instructions

Prepare a multiple-step income statement, a statement of stockholders’ equity, and a classified balance sheet for the year ended December 31, 2018 (in proper form).

Answer 1

Alpha Co.
Income Statement
For the Year Ended December 31, 2018
Sales Revenue
Sales	$120,000
Less: Sales Discounts	$5,000
Net Sales Revenue	$115,000
Cost of goods sold	$65,000
Gross Profit		$50,000
Less: Operating Expenses
Utility Expenses	$4,200
Salaries Expenses	$28,000
Supplies Expenses	$2,400
Depreciation Expenses	$5,000
Total Operating Expenses		$39,600
Income from operations		$10,400
Other Revenues and Gains
Interest Income		$500
Income before Income tax		$10,900
Less: Tax (25%)		$0
Net Income/(loss)		$10,900
Alpha Co.
Shareholder's Equity Statement
For the Month Ended December 2018
Retained Earnings		$39,600
Net Income/(loss) for the year	$10,900
Less: Dividend Paid	$10,000
Increase in retained earnings		$900
Retained Earnings		$40,500
Alpha Co.
Balance Sheet
December 31, 2018
Assets
Current Assets
Cash			$19,000
Accounts receivable			$8,000
Inventories			$35,000
Prepaid Insurance			$2,500
Supplies			$3,000
Total current assets			$67,500
Property, plant, and equipment
Equipment		$25,000
Less: Acc. Dep. - Equipment		$10,000	$15,000
Total Assets			$82,500
Liabilities and stockholders' Equity
Current Liabilities
Accounts Payable		$5,500
Notes Payable(due in 2019)		$7,000
Salaries Payable		$6,000
Deferred Revenue		$3,500
Total Current Liabilities			$22,000
Shareholder's Equity
Common Stock		$20,000
Retained Earnings		$40,500
Total Shareholder's Equity			$60,500
Total Liabilities and Shareholders' Equity			$82,500