Question

The adjusted trial balance for China Tea Company at December 31, 2018, is presented below:

	Debit			Credit
Cash		12,400
Accounts receivable		169,000
Prepaid rent		6,900
Inventory		44,000
Equipment		490,000
Accumulated depreciation - equipment					144,000
Accounts payable					49,000
Notes payable - due in three months					49,000
Salaries payable					5,900
Interest payable					2,900
Common stock					295,000
Retained earnings					91,800
Sales revenue					590,000
Costs of goods sold		275,000
Salaries expense		139,000
Rent expense		34,000
Depreciation expense		49,000
Interest expense		3,900
Advertising expense		4,400
Totals		1,227,600			1,227,600

Required:
Prepare a classified balance sheet for China Tea Company as of December 31, 2018.

Answer 1

Solution:

China Tea Company
BALANCE SHEET
As Of December 31, 2018
ASSETS	AMOUNT ($)	LIABILITIES & STOCKHOLDERS’ EQUITY	AMOUNT ($)
Current Assets		Current liabilities
Cash	12,400	Accounts payable	49,000
Accounts receivable	169,000	Notes payable - due in three months	49,000
Prepaid rent	6,900	Salaries payable	5,900
Inventory	44,000	Interest payable	2,900
Total Current Assets	232,300	Total current liabilities	106,800
		Total liabilities	106,800
Property, plant, and equipment		Stockholders’ equity
Equipment                         :$ 490,000		Common stock	295,000
Less: Accumulated depreciation – equipment                        : $144,000	346,000	Retained earnings: $ 91,800 *Add: Net Income:$84,700	176,500
		Total Stockholders’ equity	471,500
TOTAL ASSETS	578,300	TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	578,300

*Net Income

=Gross profit – Operating expenses

= (Sales revenue - Costs of goods sold) – (Salaries expense + Rent expense + Depreciation expense + Interest expense + Advertising expense)

= ($ 590,000 - $ 275,000) – ($ 139,000 + $ 34,000 + $ 49,000 + $ 3,900 + $ 4,400)

= $ 315,000 - $ 230,300

= $ 84,700