Question

These items are taken from the financial statements of
Beginning Retained Earnings	$31,000
Utilities	$2,000
Equipment	$66,000
Accounts Payable	$18,300
Cash	$10,100
Salary & Wages Payable	$3,000
Common Stock	$40,000
Dividends	$8,000
Service Revenue	$64,000
Pre-Paid Insurance	$3,500
Patent	$14,000
Maintenance and Repairs Expense	$1,800
Long-Term Debt	$17,000
Depreciation Expense	$3,600
Accounts Receivable	$11,700
Insurance Expense	$2,200
Salary & Wages Expense	$37,000
Accumulated Depreciation - Equipment	$17,600
Unearned Revenue	$3,200
Copyright	$5,000
Investment in ABC Corporation	$9,900
Land Held for Investment	$19,300
REQUIRED:
1) Label the account titles as asset, liability, equity, revenue or expense.
2) Prepare an income statement dated 12/31 of the prior year.
3) Prepare a retained earnings statement.
4) Prepare a Classified Balance Sheet.
5) Calculate the following ratios:
a) Earnings per share (assume there is no preferred stock dividends
and 15,000 average common shares outstanding)
b) Working Capital
c) Current Ratio
d) Debt to Total Assets

Answer 1

TRIAL BALANCE
1	Liabilities	Begining Retained Earnings		$31000
2	Expense	Utilities	$2000
3	Asset	Equipment	$66000
4	Liabilities	Accounts Payable		$18300
5	Asset	Cash	$10100
6	Liabilities	Salary & Wages payable		$3000
7	Equity	Common Stock		$40000
8	Equity	Dividends	$8000
9	Revenue	Service Revenue		$64000
10	Asset	Prepaid Insurance	$3500
11	Asset	Patent	$14000
12	Expense	Maintances & Repairs Expense	$1800
13	Liabilities	Long Term Debt		$17000
14	Expense	Depreciation Expense	$3600
15	Asset	Accounts Receivable	$11700
16	Expense	Insurance Expense	$2200
17	Expense	Salary & Wages Expense	$37000
18	Contra Asset	Accumulated Depreciation- Equipment		$17600
19	Liabilities	Unearned Revenue		$3200
20	Asset	Copyright	$5000
21	Asset	Investment in ABC Corporation	$9900
22	Asset	Land Held for Investment	$19300
		TOTAL	$194100	$194100

INCOME STATMENT
Revenue
Service Revenue		64000
Operating Expense
Maintances & Repairs Expense	1800
Depreciation Expense	3600
Insurance Expense	2200
Salary & Wages Expense	37000
Utilities	2000
Total Operating Expense		46600
Net Income		17400

RETAINED EARNINGS STATEMENT
Begining Retained Earnings		31000
Add     Net Income	17400
		48400
Less Dividends	8000
Ending Retained Earnings		40400

BALANCE SHEET
ASSETS
CURRENT ASSET
Cash	10100
Prepaid Insurance	3500
Accounts Receivable	11700	25300
LONG TERM INVESTMENT
Investment in ABC Corporation	9900
Land Held for Investment	19300	29200
PROPERTY & EQUIPMENT
Equipment	66000
Less Accumulated Depreciation	17600	48400
INTANGABLE ASSET
Patent	14000
Copyright	5000	19000
TOTAL ASSETS		121900
LIABILITIES
CURRENT LIABILITIES
Accounts Payable	18300
Salary & Wages payable	3000
Unearned Revenue	3200	24500
LONG TERM LIABILITIES
Long Term Debt	17000	17000
STOCK HOLDER'S EQUITY
Common Stock	40000
Retained Earnings	40400	80400
TOTAL LIABILITIES		121900

a) Earings Per Share=	Net Income - Preffered Stock Dividends
	Average common shares outstanding

=	17400-0
15000

= 1.16

b) Working capital = Current Asset - Current Liability

= 25300-24500

= 800

c) Current Ratio= Current Asset/ Current Liability

= 25300/24500

= 1.03

d) Debt to Asset ratio= Total Liabilities/Total Assets

= 24500+17000/121900

= 0.34