WILDERNESS GUIDE SERVICES, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 3 6 Cas

Question

WILDERNESS GUIDE SERVICES, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 3 6 Cash Accounts receivable Camping supplies.... $12,200 31,000 7,900 Equipment Accumulated depreciation: equipment Notes payable (due 4/1/12) 70,000 $ 60,000 9,500 25,000 5,000 Capital stock . . 1,000 102,000 87,500 1,200 9,600 5,000 Salary expense. .. Insurance expense. .. Depreciation expense: equipment Interest expense. $229,500 $229.500 a. Prepare an income statement and statement of retained earnings for the year ended December 31, 2011. Also prepare the company's balance sheet dated December 31,2011 (Hint: Unprofitable companies have no income taxes expense.) b. Does the company appear to be liquid? Defend your answer. c. Has the company been profitable in the past? Explain.

Explanation / Answer

(a) WILDERNESS GUIDE SERVICES, INC. Income Statement For the year Ended December 31, 2011 Revenue Guided Revenue Earned       1,02,000 Less: Expenses Salary expense       87,500 Camping Supply expense        1,200 Insurance expense        9,600 Depreciation expense: equipment        5,000 Interest Expenses        1,700 Total Expenses       1,05,000 Net Income          -3,000 WILDERNESS GUIDE SERVICES, INC. For the year Ended December 31, 2011 Retained Earnings (01/01/15)       15,000 Add/(Less): Net Income/(loss)       -3,000 Less: Dividends        1,000 Retained Earnings (12/31/15)       11,000 Balance Seheet December 31, 2011 Assets Cash at Bank         12,200 Accounts Receivable         31,000 Camping Supplies           7,900 Unexpired Insurance Policies           2,400 Equipment       70,000 Acc. Depreciation - Equipment       60,000         10,000 Total Assets         63,500 Liabilities and Owner's Equity Accounts Payable           9,500 Notes Payable         18,000 Total Liabilities         27,500 Stockholder's equity Capital Stock         25,000 Retained Earnings         11,000 Total Stockholder's Equity         36,000 Total Liabilities and Owner's Equity         63,500 (b) Wilderness Guide Services, Inc seems to be liquid. Its has enough quich assets (i.e. cash & accounts receivable) to meet liquidity reuirments.Its current ratio is 2.3which means it has $2.31 dollars of potential cash inflow for every dollar of current obligations dues and it is clear that co can afford its immediate liabilites. (c) Yes, the co. has been profitable in past, because co having opening retained earnings $15,000 which shows that the co had done godd business in past

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