Question

Problem 1-5B Prepare financial statements (L01-3) Tar Heel Corporation provides the following information at the end of 2021. Salaries payable to workers at the end of the year Advertising expense for the year Building that has been purehased Supplies at the end of the year Retained earnings Utility expense for the year Note payable to the bank Service revenue recognized during the year Salary expense for the year Accounts payable to suppliers Dividends paid to shareholders during the year Common stock that has been issued, including $5,000 that was issued this year Cash remaining Interest expense for the year Accounts receivable from customers Retained earnings at the beginning of the year $ 1,800 8,900 65,000 3,100 33,000 4,500 17,500 61,900 25,200 6,200 (?) 25,000 3,700 1,350 11,700 20,550 Required: 1. Prepare the income statement for the year ended December 31, 2021. 2. Prepare the statement of stockholders' equity for the year ended December 31, 2021.

Answer 1

1) Income Statement :-

Particulars	Amount($)	Amount($)
Revenue :-
Service Revenue (A)		61900
Expeneses :-
Advertising Expenses	8900
Utility Expenses	4500
Salary Expenses	25200
Interest Expenses	1350
Total Expenses (B)	39950	39950
Net Income (A-B)		21950

2) Statement of Stockholder's Equity :-

Particulars	Common Stock	Retained Earnings	Stockholder's Equity
Beginning Balance	$20000*	$20550	$40550
Stock Issue	$5000		$5000
Add : Net Income		$21950	$21950
Less : Dividends		($9500)**	($9500)
Ending Balance	$25000	$33000	$58000

*Beginning Balance of Common Stock = $25000 - $5000 = $20000

**Dividend Paid = Beginning Balance of Retained Earnings + Net Income - Ending Balance of Retaind Earnings

= $20550 + $21950 - $33000

= $42500 - $33000

= $9500

3) Balance Sheet :-

Assets	Amount($)	Liabilities	Amount($)
Current Assets :-		Accounts Payable	6200
Cash	3700	Salaries Payable	1800
Accounts Receivable	11700	Notes Payable	17500
Supplies	3100	Total Liabilities (A)	25500
Total Current Assets (A)	18500	Stockholder's Equity :-
Fixed Assets :-		Common Stock	25000
Building	65000	Retained Earnings	33000
Total Fixed Assets (B)	65000	Total Stockholder's Equity (B)	58000
Total Assets (A+B)	83500	Total Liabilities and Stockholder's Equity (A+B)	83500

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