Question

The adjusted trial balance for Tybalt Construction as of December 31, 2015, follows.

TYBALT CONSTRUCTION
Adjusted Trial Balance
December 31, 2015
No.   Account Title   Debit   Credit
101   Cash      $   5,000                 
104   Short-term investments         23,000                 
126   Supplies         8,100                 
128   Prepaid insurance         7,000                 
167   Equipment         40,000                 
168   Accumulated depreciation—Equipment                  $   20,000     
173   Building         150,000                 
174   Accumulated depreciation—Building                     50,000     
183   Land         55,000                 
201   Accounts payable                     16,500     
203   Interest payable                     2,500     
208   Rent payable                     3,500     
210   Wages payable                     2,500     
213   Property taxes payable                     900     
233   Unearned professional fees                     7,500     
251   Long-term notes payable                     67,000     
301   O. Tybalt, Capital                     126,400     
302   O. Tybalt, Withdrawals         13,000                 
401   Professional fees earned                     97,000     
406   Rent earned                     14,000     
407   Dividends earned                     2,000     
409   Interest earned                     2,100     
606   Depreciation expense—Building         11,000                 
612   Depreciation expense—Equipment         6,000                 
623   Wages expense         32,000                 
633   Interest expense         5,100                 
637   Insurance expense         10,000                 
640   Rent expense         13,400                 
652   Supplies expense         7,400                 
682   Postage expense         4,200                 
683   Property taxes expense         5,000                 
684   Repairs expense         8,900                 
688   Telephone expense         3,200                 
690   Utilities expense         4,600                 
      

   

    Totals      $   411,900         $   411,900     
      

   

  
O. Tybalt invested $5,000 cash in the business during year 2015 (the December 31, 2014, credit balance of the O. Tybalt, Capital account was $121,400). Tybalt Construction is required to make a $7,000 payment on its long-term notes payable during 2016.
  
Required:
1.1  
Prepare the income statement for the calendar year 2015.
      

1.2  
Prepare the statement of owner's equity for the calendar year 2015.
      
  

  
1.3  
Prepare the classified balance sheet at December 31, 2015.
      
  

  
2.   Prepare the necessary closing entries at December 31, 2015.
      
    Closing entries (all dated December 31, 2015):
      

  
3.  
Use the information in the financial statements to compute the following ratios:
      
  

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Answer 1

1.1	Income statement for the calendar year 2015
	Revenues:
	Professional fees earned				97000
	Rent earned				14000
	Dividends earned				2000
	Interest earned				2100
	Total (A)				115100
	Expenses:
	Depreciation expense—Building				11000
	Depreciation expense—Equipment				6000
	Wages expense				32000
	Interest expense				5100
	Insurance expense				10000
	Rent expense				13400
	Supplies expense				7400
	Postage expense				4200
	Property taxes expense				5000
	Repairs expense				8900
	Telephone expense				3200
	Utilities expense				4600
	Total (B)				110800
	Net income (A)-(B)				4300
1.2	Statement of owner's equity:
	Beginning capital balance					121400
	Add:Contribution to capital				5000
	Net income for the year				4300	9300
	Ending capital balance					130700
	Less:Withdrawals					13000
	Owner's equity					117700
1.3	Classified Balance sheet
	Assets
	Current Assets:
	Cash					5000
	Short-term investments					23000
	Supplies					8100
	Prepaid insurance					7000	43100
	Tangible Assets:
	Equipment				40000
	Less: Accumulated depreciation				20000	20000
	Building				150000
	Less: Accumulated depreciation				50000	100000
	Land					55000	175000
	Total						218100
	Liabilities and Owner's equity
	Current liabilities:
	Accounts payable					16500
	Interest payable					2500
	Rent payable					3500
	Wages payable					2500
	Property taxes payable					900
	Unearned professional fees					7500
	Long-term notes payable (Payable in 2016)					7000	40400
	Long-term liabilities:
	Long-term notes payable (67000-7000)						60000
	Owner's equity:
	O.Tybalt, Capital		(Refer 1.2)			130700
	O. Tybalt, Withdrawals					-13000	117700
	Total						218100
2	Closing entries:
	Date	Account titles and explanations			Debit	Credit
	2015
	31-Dec	Professional fees earned			97000
		Rent earned			14000
		Dividends earned			2000
		Interest earned			2100
		Income summary				115100
		(Closing of revenue accounts)
	31-Dec	Income summary			110800
		Depreciation expense—Building				11000
		Depreciation expense—Equipment				6000
		Wages expense				32000
		Interest expense				5100
		Insurance expense				10000
		Rent expense				13400
		Supplies expense				7400
		Postage expense				4200
		Property taxes expense				5000
		Repairs expense				8900
		Telephone expense				3200
		Utilities expense				4600
		(Closing of expense accounts)
	31-Dec	Income summary			4300
		O.Tybalt, Capital				4300
		(Closing of income summary account)