Question

The trial balance for a company that sells alarms, as of January 1, 2016 had the following balances:

Cash 74,000

Accounts receivable 13,000

Supplies 200

Prepaid rent 3,200

Merchandise inventory (24 @ $200; 1 @ $200) 5,000

Land 4000

Accounts payable 1,900

Unearned revenue 900

Salaries payable 1,000

Common stock 50,000

Retained earnings 47,000

The following transactions took place during 2016:

1. Paid the salaries payable from 2015.

2. Paid $4,800 on May 1, 2016, for one year's lease on the company van in advance.

3. Paid $7,200 on May 2, 2016 for one year's office rent in advance.

4. Purchased $400 of supplies on account.

5. Purchased 100 alarm systems for $28,000 cash during the year.

6. Sold 102 alarm systems for $57,000. All sales were on account.

(Compute cost of goods sold using the FIFO cost flow method)

7. Paid $2,100 on accounts payable during the year.

8. Billed $52,000 of monitoring services for the year.

9. Paid installers and other employees a total of $25,000 cash for salaries.

10. Collected $89,000 of accounts receivable during the year.

11. Paid $3,600 of advertising expense during the year.

12. Paid $2,500 of utilities expense for the year.

13. Paid a dividend of $10,000 to the shareholders.

Required:

1. Prepare the trial balance as at Dec 31, 2016 for the company

2. Prepare the income statement and balance sheet for the company.

Answer 1

Trial Balance
	Dr	Cr
Cash (74000-1000-4800-7200-28000-2100-25000-3600-2500-10000+89000)	$78,800
Accounts receivable (13000+57000+52000-89000)	$33,000
Supplies	600
Prepaid Rent	$15,200
Inventory (5000+28000-26560)	6440
Land	4000
Accounts payable (1900+400-2100)		200
Unearned Revenue		900
Salaries Payable		0
Common Stock		50000
Retained Earnings		47000
dividend	10000
Sales		$57,000
Service revnue		$52,000
Cost of good sold	$26,560
Salaries expenses	$25,000
Advertising expenses	$3,600
Utilities expernses	$2,500
Total	$205,700	$207,100
Income statement
Sales		$57,000
Service revnue		$52,000
Total revenue		$109,000
Expenses
Cost of good sold	$26,560
Salaries expenses	$25,000
Advertising expenses	$3,600
Utilities expernses	$2,500
Total expenses		$57,660
Net Income		$51,340
Statement of Retained Earnings
Beginning Balance	$47,000
Add: Net income	51340
Less: dividend	-10000
Ending Balance	$88,340
Balance sheet
For the year ending 31st December 2016
Current assets
Cash	$78,800
Accounts Receivable	$33,000
Supplies	$600
Prepaid Rent	$15,200
Invemtory	$6,440
Total current assets		$134,040
Land		4000
Total assets		$138,040
Liabilities & stockholder equity
Current liabilities
Accounts payable	200
Unearned Revenue	900
Total Current liabilities		1100
stockholder equity
common stock	50000
Retained earnings	$88,340
Total stockholder equity		138340
Total Liabilities & stockholder equity		139440

working
Date	Accounts title	Dr	Cr
1	Salaries payable	$1,000
	Cash		$1,000
2	Prepaid rent	$4,800
	Cash		$4,800
3	Prepaid rent	$7,200
	Cash		$7,200
4	Supplies	$400
	Accounts payable		$400
5	Inventory	$28,000
	Cash		$28,000
6	Accounts receivable	$57,000
	Sales		$57,000
	Cost of good sold	26560
	mercandise Inventory (200*25)+(77*280)		$26,560
7	Accounts payable	$2,100
	Cash		$2,100
8	Accounts receivable	$52,000
	Service Revenue		$52,000
9	Salaries expenses	$25,000
	Cash		$25,000
10	Cash	$89,000
	Accounts receivable		$89,000
11	Advertising expenses	$3,600
	Cash		$3,600
12	Utilities expernses	$2,500
	Cash		$2,500
13	Dividend	$10,000
	Cash		$10,000