Question

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Answer 1

Income Statement
Revenue
Service Revenue	$            75,000
Total Revenues		$        75,000
Expenses
Salaries expense	$            15,700
Interest Expense	$              2,400
Depreciation expense - Building	$              2,100
Depreciation expense - Equipment	$              2,200
Insurance Expense	$              1,200
Supplies Expense	$              1,200
Total Expenses		$        24,800
Net Income		$        50,200

Retained Earnings Statement
Retained Earnings, January 1, 2018	$            13,000
Add : Net Income	$            50,200
	$            63,200
Less : Dividend	$              2,600
Retained Earnings, December 31, 2018	$           60,600

Balance Sheet
Assets
Current Assets
Cash	$            15,600
Accounts Receivable	$            49,200
Prepaid Insurance	$              6,100
Office Supplies	$              2,600
Total Current Assets		$        73,500
Property, Plant & Equipment
Building	$            55,000
Accumulated Depreciation - Building	$          -24,500
Book Value - Building	$            30,500
Equipment	$            20,000
Accumulated Depreciation - Equipment	$            -7,000
Book Value - Equipment	$            13,000
Property, Plant & Equipment		$        43,500
Total Assets		$     1,17,000
Liabilities & Stockholder's Equity
Current Liabilities
Accounts Payable	$            27,600
Interest Payable	$              2,400
Salaries Payable	$              3,800
Unearned Revenue	$              1,200
Total Current Liabilities		$        35,000
Non Current Liabilities
Notes Payable		$           2,400
Total Liabilities		$        37,400
Stockholder's Equity
Common Stock	$            19,000
Retained Earnings	$            60,600
Total Stockholder's Equity		$        79,600
Total Liabilities & Stockholder's Equity		$     1,17,000

Account Titles	Debit	Credit
Service Revenue	$            75,000
Income Summary		$        75,000
(Revenue transferred to temporary account)
Income Summary	$            24,800
Salaries expense		$        15,700
Interest Expense		$           2,400
Depreciation expense - Building		$           2,100
Depreciation expense - Equipment		$           2,200
Insurance Expense		$           1,200
Supplies Expense		$           1,200
(Expenses transferred to temporary account)
Income Summary	$            50,200
Retained Earnings		$        50,200
(Balance of Income Summary a/c i.e. net income transferred to retained earnings)
Retained Earnings	$              2,600
Dividend		$           2,600
(TO close dividend account)

Current Ratio = Current Assets / Current Liabilities
= $73500/35000 = 2.1