Question

The December 31, 2021, adjusted trial balance for the Blueboy Cheese Corporation is presented below. Account Title Debits Credits Cash 51,900 Accounts receivable 290,000 Prepaid rent 9,000 Inventory 43,000 Office equipment 530,000 Accumulated depreciation 222,000 Accounts payable 56,000 Notes payable (due in six months) 39,000 Salaries payable 6,800 Interest payable 1,300 Common stock 400,000 Retained earnings 115,000 Sales revenue 680,000 Cost of goods sold 408,000 Salaries expense 102,000 Rent expense 27,000 Depreciation expense 53,000 Interest expense 2,600 Advertising expense 3,600 Totals 1,520,100 1,520,100 Required: 1-a. Prepare an income statement for the year ended December 31, 2021. 1-b. Prepare a classified balance sheet as of December 31, 2021. 2. Prepare the necessary closing entries at December 31, 2021.

Answer 1

Answer:

Blueboy Cheese Corporation

Income Statement

December 31, 2021

Account Title                                  Debits                      Credits

Sales revenue                                                                     680,000

Less Cost of goods sold               408,000

Gross Profit                                                                          272,000

less

Salaries expense                       108,800

Rent expense                           18,000

Depreciation expense             53,000

Interest expense                        3,900

Advertising expense                  3,600

Un adjusted Profit                                                              84,700

Adjusted Profit                                                                  82,900                                

Blueboy Cheese Corporation

Balance  Sheet

December 31, 2021

Account Title                                  Debits                      Credits

Cash                                               51,900

Accounts receivable                    290,000                                

Inventory                                      43,000

Office equipment                         308,000

                                       

Accounts payable                                                             56,000

Notes payable (due in six months)                                    39,000

Common stock                                                                    400,000

Retained earnings                115,000 + 82,900=              197,900

                                                                                                             

Total                                            $ 692,900                         692,900

Closing Entries

Dec 31            Sales Revenue             $680,000 Dr

                             Income Summary                    $680,000 Cr

The first closing entry transfers credit balances in revenue ( and gain ) accounts to the income summary accounts.

Dec 31          Income Summary          $ 187,300 Dr

                               Salaries expense                       108,800 Cr

                                Rent expense                           18,000 Cr

                                 Depreciation expense             53,000 Cr

                                     Interest expense                        3,900 Cr

                                       Advertising expense                  3,600 Cr

The second closing entry transfers debit balances in expense ( and loss) to the income summary accounts.

Dec 31                    Income Summary            $ 82,900

                                    Retained Earnings Accounts            $ 82,900

The third entry transfers the balance of income summary account to the owner's capital account or retained earnings account.