required information the following information applies to the questions displayed below. stark company has…

required information the following information applies to the questions displayed below. stark company has the following adjusted accounts with normal balances at its december 31 year - end. notes payable $ 28,000 accumulated depreciation - buildings $ 32,000 prepaid insurance 4,200 accounts receivable 7,400 interest expense 840 utilities expense 3,000 accounts payable 10,000 interest payable 780 wages payable 2,100 unearned revenue 1,650 cash 44,000 supplies expense 540 wages expense 9,200 buildings 210,000 insurance expense 3,500 dividends 11,500 common stock 27,000 depreciation expense - buildings 10,500 services revenue 105,000 supplies 1,650 retained earnings 99,800 use the adjusted accounts for stark company to prepare the (1) income statement and (2) statement of retained earnings for the year ended december 31 and (3) balance sheet at december 31. the retained earnings account balance was $99,800 on december 31 of the prior year. answer is complete but not entirely correct.

required information the following information applies to the questions displayed below. stark company has the following adjusted accounts with normal balances at its december 31 year - end. notes payable $ 28,000 accumulated depreciation - buildings $ 32,000 prepaid insurance 4,200 accounts receivable 7,400 interest expense 840 utilities expense 3,000 accounts payable 10,000 interest payable 780 wages payable 2,100 unearned revenue 1,650 cash 44,000 supplies expense 540 wages expense 9,200 buildings 210,000 insurance expense 3,500 dividends 11,500 common stock 27,000 depreciation expense - buildings 10,500 services revenue 105,000 supplies 1,650 retained earnings 99,800 use the adjusted accounts for stark company to prepare the (1) income statement and (2) statement of retained earnings for the year ended december 31 and (3) balance sheet at december 31. the retained earnings account balance was $99,800 on december 31 of the prior year. answer is complete but not entirely correct.

Answer

Explanation:

Step1: Prepare income statement

  • Revenues: Services revenue = $105,000
  • Expenses: Interest expense = $840, Utilities expense = $780, Wages expense = $9,200, Supplies expense = $11,500, Insurance expense = $3,500, Depreciation expense - Buildings = $1,650
  • Net income = Revenues - Total expenses Total expenses = $840 + $780+ $9,200 + $11,500 + $3,500 + $1,650=$27,470 Net income = $105,000 - $27,470 = $77,530

Step2: Prepare statement of retained earnings

  • Beginning - retained earnings = $99,800
  • Add: Net income = $77,530
  • Less: Dividends = $10,500 Ending - retained earnings = $99,800 + $77,530 - $10,500=$166,830

Step3: Prepare balance - sheet

Assets:

  • Current assets:
    • Cash = $44,000
    • Accounts receivable = $7,400
    • Prepaid insurance = $4,200
    • Supplies = $540 Total current assets = $44,000 + $7,400+ $4,200 + $540 = $56,140
  • Non - current assets:
    • Buildings = $210,000
    • Less: Accumulated depreciation - Buildings = $32,000 Net buildings = $210,000 - $32,000 = $178,000 Total assets = $56,140+ $178,000 = $234,140

Liabilities:

  • Current liabilities:
    • Accounts payable = $10,000
    • Interest payable = $1,650
    • Wages payable = $2,100
    • Unearned revenue = $540 Total current liabilities = $10,000 + $1,650+ $2,100 + $540 = $14,290
  • Non - current liabilities:
    • Notes payable = $28,000 Total liabilities = $14,290 + $28,000 = $42,290

Equity:

  • Common stock = $27,000
  • Retained earnings = $166,830 Total equity = $27,000 + $166,830 = $193,830 Total liabilities and equity = $42,290 + $193,830 = $234,140

Answer:

Income Statement

Particulars Amount ($)
Services revenue 105,000
Interest expense 840
Utilities expense 780
Wages expense 9,200
Supplies expense 11,500
Insurance expense 3,500
Depreciation expense - Buildings 1,650
Net income 77,530

Statement of Retained Earnings

Particulars Amount ($)
Beginning retained earnings 99,800
Add: Net income 77,530
Less: Dividends 10,500
Ending retained earnings 166,830

Balance Sheet

Particulars Amount ($)
Assets
Current assets 56,140
Non - current assets 178,000
Total assets 234,140
Liabilities
Current liabilities 14,290
Non - current liabilities 28,000
Total liabilities 42,290
Equity
Common stock 27,000
Retained earnings 166,830
Total equity 193,830
Total liabilities and equity 234,140