Question

Q2. The December 31 2015 adjusted TB for the Blueboy Cheese Corporation is presented below
Debits
Credits
Cash
21,000
Account Receivable
300,000
Prepaid Rent
10,000
Inventory
50,000
Office equipment
600,00
Accumulated depreciation- office equipment
250,000
Account payable
60,000
Notes Payable (due within 6 months)
60,000
Salaries payable
8,000
Interest payable
2,000
Equity
400,000
Retained earnings
100,000
Sales Revenue
800,000
Cost of goods sold
480,000
Salaries Expense
120,000
Rent Expense
30,000
Depreciation Expense
60,000
Interest expense
4,000
Advertising Expense
5,000
1,680,000
1,680,000
Required:
Prepare an income statement for the year ended December 31, 2015, and a Balance sheet.
Note: Retained earnings is Net Income that has not been used up from previous years. Add it up to the Equity

Answer 1

SOLUTION

(A)

BLUEBOY CHEESE CORPORATION

Income Statement

For the Year Ended December 31, 2015

	Amount ($)	Amount ($)
Sales revenue		800,000
Cost of goods sold		480,000
Gross profit (loss)		320,000
Operating expenses:
Salaries expense	120,000
Rent expense	30,000
Depreciation expense	60,000
Advertising expense	5,000
Total operating expenses		215,000
Operating income (loss)		105,000
Other expense:
Interest expense		4,000
Net income (loss)		101,000

(B)

BLUEBOY CHEESE CORPORATION

Balance sheet

At December 31, 2015

	Amount ($)	Amount ($)
Assets
Current assets:
Cash		21,000
Accounts receivable		300,000
Inventory		50,000
Prepaid rent		10,000
Total current assets		381,000
Property and equipment:
Equipment	600,000
Less: Accumulated depreciation	(250,000)	350,000
Total assets		731,000
Liabilities and Shareholder's Equity
Current liabilities:
Accounts payable		60,000
Salaries payable		8,000
Interest payable		2,000
Notes payable		60,000
Total current liabilities		130,000
Shareholder's equity:
Common stock	400,000
Retained earnings ($100,000 + $101,000)	201,000	601,000
Total Liabilities and Shareholder's Equity		731,000