Question

The following are the information for Chun Equipment Co. for 2018. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)

Salaries expense	$	122,420		Interest receivable (short term)	$	640
Common stock		52,000		Beginning retained earnings		51,193
Notes receivable (short term)		16,150		Operating expenses		94,060
Allowance for doubtful accounts		6,980		Cash flow from investing activities		(103,210	)
Accumulated depreciation		34,800		Prepaid rent		13,900
Notes payable (long term)		123,360		Land		47,400
Salvage value of equipment		6,670		Cash		24,050
Interest payable (short term)		2,530		Inventory		161,560
Uncollectible accounts expense		13,920		Accounts payable		57,290
Supplies		3,130		Interest expense		32,450
Office equipment		78,930		Salaries payable		11,190
Interest revenue		5,600		Unearned revenue		59,760
Sales revenue		519,590		Cost of goods sold		186,013
Dividends		12,000		Accounts receivable		112,530
Rent expense		5,140

Required

Prepare a multistep income statement and balance sheet for Chun Equipment Co. for 2018.

Prepare a multistep income statement for Chun Equipment Co. for 2018.

	CHUN EQUIPMENT CO. Income Statement For the Year Ended December 31, 2018 Sales revenue Cost of goods sold Gross margin Operating expenses Operating expenses Rent expense Salaries expense Total operating expenses 0 Operating income Non-operating Items Interest expense Interest revenue Total non-operating items 0 Net income

Prepare the balance sheet for Chun Equipment Co. for 2018. (Be sure to list the assets in the order of their liquidity.)

CHUN EQUIPMENT CO. Balance Sheet As of December 31, 2018 Assets Current assets Cash Less: Allowance for doubtful accounts 0 Interest receivable Inventory Prepaid rent Supplies Notes receivable Total current assets $0 Property, plant and equipment Office equipment Less: Accumulated depreciation 0 Land Total property, plant and equipment 0 Total assets $0 Liabilities and stockholders’ equity Current liabilities Accounts payable Interest payable Salaries payable Unearned revenue Total current liabilities $0 Long-term liabilities Notes payable Total long-term liabilities 0 Total liabilities 0 Stockholders’ equity Common stock Retained earnings Total stockholders’ equity 0 Total liabilities and stockholders’ equity $0

Answer 1

Answer :

CHUN EQUIPMENT CO.

Income Statement.

For the Year Ended December 31, 2018.

Sales revenue		$ 519,590
Cost of goods sold		(186,013)
Gross margin		333,577
Operating expenses
Operating expenses	94,060
Rent expense	5,140
Salaries expense	122,420
Uncollectible accounts expense	13,920
Total operating expenses		235,540
Operating income		98,037
Non-operating Items
Interest expense	32,450
Interest revenue	5,600
Total non-operating items		26,850
Net income		$71,187

CHUN EQUIPMENT CO.

Balance Sheet

As of December 31, 2018

Assets
Current assets
Cash		24,050
Accounts receivable	112,530
Less : Allowance for doubtful accounts	(6,980)	105,550
Interest receivable		640
Inventory		161,560
Prepaid rent		13,900
Supplies		3,130
Notes receivable		16,150
Total current assets			324,980
Property, plant and equipment
Office equipment	78,930
Less :  Accumulated depreciation	(34,800)	44,130
Land		47,400
Total property, plant and equipment			91,530
Total assets			$416,510
Liabilities and stockholders’ equity
Current liabilities
Accounts payable		57,290
Interest payable		2,530
Salaries payable		11,190
Unearned revenue		59,760
Total current liabilities			130,770
Notes payable		123,360
Total long-term liabilities			123,360
Total liabilities			254,130
Stockholders’ equity
Common stock		52,000
Retained earnings [Note 1]		110,380
Total stockholders’ equity			162,380
Total liabilities and stockholders’ equity			$416,510

Note 1 : Retained earnings = Beg. retained earnings + Net income - Dividends

= 51,193 + 71,187 - 12,000 = $110,380