The adjusted trial balance for China Tea Company at December 31, 2018, is presen

Question

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

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

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

Explanation / Answer

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

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

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