Question

P2-4A These items are taken from the financial statements of Mbong Corporation for the year ended December 31, Prepare financial 2018: statements discuss relationships Retained carnings, January 1 $221,000 (LD1) Cash 11.900 Salaries payable 3,000 Utilities expense 2,000 66,000 Equipment 15.000 Accounts payable 72.000 Buildings 34,200 Common shares 5.000 Dividends declared 213.900 Service revenue

Answer 1

Mbong Corporation Income Statement Year Ended December 31, 2018 Revenues: Service revenue 213900 500 Interest revenue Total revenues 214400 Expenses: Salaries expense 129800 Depreciation expense 6200 Operating Expense 39400 Repair and maintenance expense 2800 Insurance expense 2200 Utilities expense 2000 Interest expense 1500 Supplies expense Total expenses 1000 184900 Profit before income tax 29500 Income tax expense 6000 Profit 23500 Statement of Changes in Equity Year Ended December 31, 2018 Common Retained Shares Earnings Total Equity Balance, January 1 30000 221000 251000 Issued common shares 4200 4200 Profit 23500 23500 Dividends -5000 -5000 Balance, December 31 34200 239500 273700

Statement of Financial Position December 31, 2017 Assets Current assets Cash 11900 Trading investments 20000 Accounts receivable 14200 Supplies 200 Prepaid insurance 2000 Total current assets 48300 Property, plant, and equipment Land 156000 Building 72000 Less: Accumulated depreciation-building -18000 54000 Equipment 66000 Less: Accumulated depreciation-equipment -17600 48400 Total property, plant, and equipment 258400 Total assets 306700 Liabilities and Shareholders' Equity Current liabilities Accounts payable Salaries payable 15000 3000 Current portion of bank loan payable 1500 Total current liabilities 19500 Non-current liabilities Bank loan payable ($15,000 - $1,500) 13500 Total liabilities 33000 Shareholders' equity Common shares 34200 Retained earnings 239500 Total shareholders' equity 273700 Total liabilities and shareholders' equity 306700

The income statement reports the profit or loss for the period. This figure is then used in the statement of changes in equity, along with dividends and any issues (or repurchases) of shares to calculate the balances in common shares and retained earnings at the end of the period. These ending balances are then used in the statement of financial position to determine shareholders' equity and complete the accounting equation.