On December 31, 2016, Information Inc. completed its third year of operations. A

Question

On December 31, 2016, Information Inc. completed its third year of operations. Abdul Mukhtar is a student working part-time in the company’s business office while taking his first accounting course. Abdul assembled the following list of account balances, which are not arranged in any particular order:

These account amounts are correct, but Abdul did not consider the following information:

A) Determine the amounts that would appear in an adjusted trial balance for Information Inc. as at December 31, 2016.

B) Prepare a statement of income for the year ended December 31, 2016.

C) Calculate the amount of retained earnings as at December 31, 2016.

D) Prepare a classified statement of financial position as at December 31, 2016.

Accounts Receivable $150,000 Advertising Expense $ 76,000 Interest Expense 2,000 Cash 20,000 Notes Receivable 26,000 Inventory 140,000 Cost of Goods Sold 590,000 Dividends Declared 12,000 Common Shares 570,000 Unearned Revenue 6,000 Building 360,000 Insurance Expense 6,300 Accumulated Depreciation, Equipment 20,000 Retained Earnings (as at January 1, 2016) 177,000 Land 160,000 Equipment 200,000 Accumulated Depreciation, Building 40,000 Miscellaneous Expense 5,200 Sales 963,000 Accounts Payable 72,700 Utilities Expense 2,500 Wages Expense 125,000 Notes Payable 30,000 Supplies 3,700

Explanation / Answer

Adjusted trail balance Debit Credit Accounts receviable 150,000 interest expense 2,000 note receivable 26,000 Cost of goods sold 590,000 Common shares 570,000 Building 360,000 Accumulated - buil 57,000 land 160,000 acculated - equipment 42,000 sales 963,000 Utilties expense 2,500 Notes payable 30,000 Advertising expense 76,000 Caash 26,600 inentory 140,000 dividends declared 59,000 dividend payable 47,000 unearned revenue 6,000 insurance expense 5,400 prepaid insurance 900 Retained earnings 177,000 Equipment 200,000 misc expense 5,200 Accounts payable 72,700 Wage expense 127,800 Wages payable 2,800 supplies 500 supplies expense 3,200 interest receivable 867 interet income 867 unearned rent revenue 4,400 rent revenue 2,200 depreciation - building 17,000 depre - equipment 22,000 1,974,967 1974967 Statement of income Sales 963,000 less :cost of goods sold -590,000 Gross profit 373,000 operating expenses utilities expense 2,500 Advertising expense 76,000 insurance expense 5,400 Misc. expense 5,200 Wage expense 127,800 supplies expense 3,200 Depreciation expense 39,000 total operating expe -259,100 net operating income 113,900 other income and expenses interes expense -2,000 interes income 867 rent revenue 2,200 1,067 Net income 114,967 Retained earnings opening balance 177,000 Add: Net income 114,967 less: Dividend declared -59,000 closing balance 232,967 Balance sheet assets Cash 26,600 Account receivbale 150,000 prepaid expense 900 supplies 500 inventory 140,000 note receivbale 26,000 interest receivbale 867 344,867 PP&E building 360,000 accumulated depr -57,000 303,000 Equipment 200,000 accumualted dep -42,000 158,000 land 160,000 621,000 total assets 965,867 liabilities accounts payable 72,700 unearned revenue 6,000 unearned rent revenue 4,400 wages payable 2,800 dividends payable 47,000 current libaility 132,900 132,900 notes payab;e 30,000 Stockholers equity comon stock 570,000 Retained earnings 232,967 total equity 802,967 total liability and equity 965,867

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