Question

Longhorn Corporation provides low-cost food delivery services to senior citizens. At the end of the year on December 31, 2021, the company reports the following amounts:
Cash $ 1,300 Service revenue $ 71,700
Equipment 20,000 Cost of goods sold (food expense) 54,200
Accounts payable 2,600 Buildings 22,000
Delivery expense 3,400 Supplies 1,600
Salaries Expense 6,300 Salaries payable 900
In addition, the company had common stock of $22,000 at the beginning of the year and issued an additional $2,200 during the year. The company also had retained earnings of $9,400 at the beginning of the year.

Required:

Prepare the income statement for Longhorn Corporation.
Prepare the statement of stockholders’ equity for Longhorn Corporation.
Prepare the balance sheet for Longhorn Corporation.

Answer 1

Answer:

1.                 Longhorn Corporation

                     Income Statement

     For the year ended December 31, 2021

   Service Revenue        $71,700

    Cost of goods sold         54,200

    Gross profit               $17,500

   Operating expenses:

   Delivery expense         3,400

  Salaries expense        6,300  

   Operating income            $7,800

2.                                       Longhorn Corporation  

                                          Stockholder's Equity  

                                        As of December 31, 2021  

 

                      Capital            Retained Earnings     Total

1-Jan-21               $22,000              $9,400                   $ 31,400

Issuance of share 2,200                                                 2,200

Net income                                7,800                        7,800

31-Dec-21       $24,200              $17,200                     $41,400

3.                              Longhorn Corporation

                                       Balance Sheet

                              As of December 31, 2021

                                           Asset

Current Assets

   Cash        $1,300

   Supplies  1,600                                          

Total current assets 2,900

Non-current assets

Equipment 20,000

Buildings 22,000                                        

Total non-current assets 42,000

Total assets $44,900                                          

Liabilities and Equity

Current liability

  Accounts payable $2,600

 Salaries payable      900                          

Total current liabilities $3,500

Total liabilities         $3,500                                

Equity

Capital stock         $24,200

Retained earnings    17,200                                    

Total equity         $41,400

Total liabilities and Equity $44,900                        

Explanation:

1. Income Statement

In preparation of Income statement, we must closed all nominal accounts with it starts from revenue and deduct all expenses to arrive the operating income. It is important that we never forget the headings consists of Name of the company, What schedule to prepare and what period it is applicable for.

2.Statement of changes in Equity

In preparation of statement of changes equity, all transaction affecting the corporation's capital will be presented here. Begins with the capital, add additional issuance and the net income for the period that will be closed to retained earnings.

3. Balance sheet

This schedule presents the corporations real accounts. Started from assets, liabilities and the Equity.  It is important that we never forget the headings consists of Name of the company, What schedule to prepare and what period it is applicable for.