Question

The December 31, 2018, adjusted trial balance for the Blueboy Cheese Corporation is presented below. Account Title Debits Credits Cash 55,000 Accounts receivable 275,000 Prepaid rent 7,500 Inventory 40,000 Office equipment 500,000 Accumulated depreciation—office equipment 210,000 Accounts payable 50,000 Note payable (due in six months) 30,000 Salaries payable 6,500 Interest payable 1,000 Common stock 400,000 Retained earnings 95,000 Sales revenue 650,000 Cost of goods sold 390,000 Salaries expense 97,500 Rent expense 22,500 Depreciation expense 50,000 Interest expense 2,000 Advertising expense 3,000 Totals 1,442,500 1,442,500 Required: 1-a. Prepare an income statement for the year ended December 31, 2018. 1-b. Prepare a classified balance sheet as of December 31, 2018. 2. Prepare the necessary closing entries at December 31, 2018.

Answer 1

	Income statement
	Sales revenue		650000
	Expense
	Cost of goods sold	390000
	Salaries expense	97500
	Rent expense	22500
	Depreciation expense	50000
	Interest expense	2000
	Advertising expense	3000
	Total expense		565000
	Net income		85000
	Retained earnings statement
	Beginning retained earnings	95000
	Add net income	85000
	Total	180000
	Less dividend paid	0
	Ending Retained earnings	180000
	Classified balance sheet
	Assets
	Current assets
	Cash	55000
	Accounts receivable	275000
	Prepaid rent	7500
	Inventory	40000
	Total current assets		377500
	Plant property and equipment
	Office equipment	500000
	Accumulated depreciation equipment	-210000
	Total plant property and equipment		290000
	Total assets		667500
	Liabilities and stockholders equity
	Current liabilities
	Accounts payable	50000
	Notes payable (due in 6 months)	30000
	Salaries payable	6500
	Interest payable	1000
	Total current liabilities		87500
	Stockholders equity
	Common stock	400000
	Retained earnings	180000
	Total stockholders equity		580000
	Total liabilities and stockholders equity		667500
	Closing entries
		Debit	Credit
1	Sales revenue	650000
	Income summary		650000
2	Income summary	565000
	Cost of goods sold		390000
	Salaries expense		97500
	Rent expense		22500
	Depreciation expense		50000
	Interest expense		2000
	Advertising expense		3000
3	Income summary	85000
	Retained earnings		85000