Question

In: Accounting

The following is Gaze Corporation year-end adjusted trial balance dated December 31, 2019. Gaze Co. Adjusted...

The following is Gaze Corporation year-end adjusted trial balance dated December 31, 2019.

Gaze Co.

Adjusted Trial Balance

at 31 December 2019

                                                                                Debit                        Credit                         

Cash                                                                        € 51,402                           

Accounts receivable                                                 2,400                                

Office supplies                                                         600                                   

Prepaid rent                                                             1,440                                

Office equipment                                                     64,800                              

Accumulated depreciation: office equipment                                        € 42,300

Accounts payable                                                                                      1,680

Interest payable                                                                                           432

Income taxes payable                                                                               2,100

Unearned revenue                                                                                  10,800

Capital stock                                                                                           36,000

Retained earnings                                                                                     9,600

Dividends                                                               1,200                                

Consulting services revenue                                                                   72,000

Office supplies expense                                           726                                   

Depreciation expense: office equipment                  9,900                                

Rent expense                                                          1,212                                

Salaries expense                                                     32,520                              

Interest expense                                                      432                                   

Income taxes expense                                             8,280                                              

Totals                                                                      € 174,912           €174,912

Instructions:

Using Adjusted Trial Balance above, perform the following tasks:

(1) Prepare an Income Statement for the year ended December 31, 2019 (10 points).

(2) Prepare a Statement of Retained Earnings for the year ended December 31, 2019 (10 points).

(3) Prepare a Balance Sheet dated December 31, 2019 (20 points).

(4) Prepare all necessary closing entries at December 31, 2019 (20 points).

(5) Prepare an after-closing trial balance dated December 31, 2019 (10 points).

(6) Does the company appear to be liquid? Explain. Justify your conclusion with calculation of working capital and current ratio (15 points).

(7) Has the company been profitable in the past? What about this year? Justify your conclusion with calculation of net income percentage and return on equity (15 points).

Solutions

Expert Solution

           1 Gaze Co.
Income Statement
For the Year Ended December 31, 2019
Revenue:
Consulting services revenue          72,000
Total Revenue          72,000
Expenses:
Office supplies expense              726
Depreciation expense: office equipment               9,900
Rent expense               1,212
Salaries expense          32,520
Interest expense              432
Income taxes expense              8,280
Total Expenses          53,070
Net Income          18,930
            2 Gaze Co.
Statement of Retained Earnings
For the Year Ended December 31, 2019
Retained Earnings, January 1, 2019            9,600
Add: Net Income          18,930
Less: Dividend            1,200
Retained Earnings, December 31, 2021          27,330
            3 Gaze Co.
Balance Sheet
December 31, 2019
Current Assets Liabilities
Cash          51,402 Accounts Payable          1,680
Accounts Receivable            2,400 Interest payable                    432
Office Supplies              600 Income taxes payable               2,100
Prepaid Rent            1,440 Unearned Revenue 10800
Total Current Assets          55,842 Total Liabilties         15,012
Non-Current Assets Stockholders' Equity
Office Equipment          64,800 Capital Stock         36,000
Less: Accumulated Depreciation - Office Equip.          42,300 Retained Earnings         27,330
Total Non-Current Assets          22,500 Total Stockholders' Equity         63,330
Total Assets        78,342 Total Liabilities and Stockholders' Equity       78,342
            4
Date Accounts and Explanation Debit Credit
Dec 31 Consulting services revenue          72,000
Income Summary                                                                72,000
Dec 31 Income Summary          53,070
Office supplies expense                                                                     726
Depreciation expense: office equipment                                                                     9,900
Rent expense                                                                     1,212
Salaries expense                                                                32,520
Interest expense                                                                     432
Income taxes expense                                                                    8,280
Dec 31 Income Summary          18,930
Retained Earnings                                                                18,930
Dec 31 Retained Earnings            1,200
Dividends                                                                  1,200

ekkarill92 answered 2 years ago
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