Question

The adjusted trial balance for China Tea Company at December 31, 2021, is presented below:

	Debit			Credit
Cash		11,300
Accounts receivable		158,000
Prepaid rent		5,800
Inventory		33,000
Equipment		380,000
Accumulated depreciation—equipment					133,000
Accounts payable					38,000
Notes payable—due in three months					38,000
Salaries payable					4,800
Interest payable					13,100
Common stock					240,000
Retained earnings					67,600
Dividends		11,300
Sales revenue					480,000
Costs of goods sold		220,000
Salaries expense		128,000
Rent expense		23,000
Depreciation expense		38,000
Interest expense		2,800
Advertising expense		3,300
Totals		1,014,500			1,014,500

Required:
Prepare a classified balance sheet for China Tea Company as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

China Tea Company
BALANCE SHEET
At December 31, 2021
	$	$
Assets
Current Assets
Cash	11,300.00
Accounts Receivable	158,000.00
Prepaid Rent	5,800.00
Inventory	33,000.00
Total current assets		208,100.00
Property, plant and equipment
Equipment	380,000.00
Less: Accumulated Depreciation	(133,000.00)	247,000.00
Total assets		455,100.00
Liabilities and stockholders’ equity
Current liabilities
Accounts Payable	38,000.00
Notes Payable (Due in 3 months)	38,000.00
Salaries Payable	4,800.00
Interests Payable	13,100.00
Total Current liabilities		93,900.00
Stockholders’ equity
Common stock	240,000.00
Retained earnings	121,200.00
Total stockholders’ equity		361,200.00
Total liabilities and stockholders’ equity		455,100.00
Explanation
China Tea Company
Income Statement
For the Year ended December 31, 2021
	$	$
Sales revenue		480,000.00
Less: Cost of goods sold		220,000.00
Gross Margin		260,000.00
Less: Expenses:
Salaries Expenses	128,000.00
Rent Expenses	23,000.00
Depreciation Expenses	38,000.00
Interest Expenses	2,800.00
Advertising Expense	3,300.00
Total expenses		195,100.00
Net Income (Loss)		64,900.00
China Tea Company
Retained Earnings Statement
At December 31, 2021
	$
Beginning Retained earnings	67,600.00
Add: Net income (Loss)	64,900.00
Less: Dividends Paid	(11,300.00)
Ending Retained earnings	121,200.00