Question

• Briefly explain the three types of financial statements used by businesses and explain the balance sheet in more details (200 words)
• For the following corporation ABC, prepare Income statement, Retained Earning statement, and Balance sheet statement from the following information data for the year ended Dec,31, 2018

Service revenue   $51,000
Accounts receivable   $12,000
Accounts payable   $6,000
Building rental expense   $27,000
Notes payable   $15,000
Common stock   $30,000
Retained earnings   ?
Equipment   $48,000
Insurance expense   $3,000
Supplies   $3,600
Supplies expense   $600
Cash   $6,000
Dividends   $1,800

Answer 1

Income statement
Service revenue	$            51,000
Total revenue	$            51,000
Expenses:
Rent expense	$            27,000
Insurance expense	$              3,000
Supplies expense	$                  600
Total expenses	$            30,600
Net income	$            20,400

Statement of retained earnings
Beginning balance	-
Add: net income	20,400
Less: dividends	(1,800)
Closing balance (balance sheet)	18,600

Balance sheet
Assets	Amount	Liabilities and equity	Amount
Current assets:		Current liabilities:
Cash	6,000	Accounts payable	6,000
Receivables	12,000	Total current liabilities	6,000
Supplies	3,600
Total current assets	21,600
		Long-term debt:
Property plant and equit	48,000	Note payable	15,000
		Total long term liabilities	15,000
Less: Acc dep	-	Total liabilities	21,000
Net fixed assets	48,000	Shareholders equity:
		Common stock	30,000
		Retained earnings (b/f)	18,600
		Total equity	48,600
Total assets	69,600	Total liabilities and equity	69,600