Question

Prepare the financial statements for Smart Touch Learning for the month of December. Remember that the business started operations this month so all beginning balances were zero.
SMART TOUCH LEARNING
Adjusted Trial Balance
December 31, 2016
Balance
Account Title Debit Credit
Cash 45,710
Accounts Receivable 1,300
Office Supplies 350
Prepaid Insurance 1,050
Furniture 9,100
Accumulated Depreciation - Furniture 100
Salaries Payable 4,600
Unearned Revenue 4,400
Common Stock 35,500
Dividends 4,600
Service Revenue 27,600
Salaries Expense 7,200
Depreciation Expense Furniture 100
Insurance Expense 350
Utilities Expense 380
Rent Expense 2,000
Supplies Expense 60
Total 72,200 72,200

Answer 1

Answer:

Smart Touch Learning

1. Income Statement

For the year ended December 31, 2016

Service Revenue                                  $27,600

Salaries Expense                        7,200

Depreciation Expense Furniture   100

Insurance Expense                       350

Utilities Expense                           380

Rent Expense                            2,000

Supplies Expense                          60    10,090

Net income                                            $17,510

2. Statement of Retained Earnings

Net income                   $17,510

Dividends                       (4,600)

Retained earnings       $12,910

3. Balance Sheet

As of December 31, 2016

Assets

Current Assets:

Cash                                             45,710

Accounts Receivable                     1,300

Office Supplies                                350

Prepaid Insurance                        1,050   48,410

Noncurrent assets:

Furniture                                       9,100

Acc. Depreciation - Furniture        (100)   9,000

Total assets                                              57,410

Liabilities and Equity

Current liabilities:

Salaries Payable                                       4,600

Unearned Revenue                                  4,400

Total liabilities                                           9,000

Equity:

Common Stock                                      35,500

Retained earnings                                   12,910

Total equity                                             48,410

Total liabilities and equity                      57,410

4. Statement of Cash Flows

Operating activities:

Net income                    $17,510

Add Non-cash flows:

Depreciation expense        100

Working capital changes:

Accounts Receivable      (1,300)

Office Supplies                 (350)

Prepaid Insurance          (1,050)

Salaries Payable             4,600

Unearned Revenue       4,400

Net operating cash    $23,910

Investing activities:

Furniture                     ($9,100)

Financing activities:

Common Stock          35,500

Dividends                    (4,600)

Net financing cash  $30,900

Net cash flows         $45,710

Explanation:

a) Data and Calculations:

SMART TOUCH LEARNING

Adjusted Trial Balance

December 31, 2016  

Account Title                                 Debit   Credit

Cash                                             45,710

Accounts Receivable                     1,300

Office Supplies                                350

Prepaid Insurance                        1,050

Furniture                                       9,100

Accumulated Depreciation - Furniture        100

Salaries Payable                                        4,600

Unearned Revenue                                  4,400

Common Stock                                      35,500

Dividends                                    4,600

Service Revenue                                   27,600

Salaries Expense                        7,200

Depreciation Expense Furniture   100

Insurance Expense                       350

Utilities Expense                           380

Rent Expense                            2,000

Supplies Expense                          60

Total                                        72,200   72,200