Answer:
These can be prepared as shown below:
Explanation:
1. Prepare a statement of stockholder equity for the year ends December 31, 2018, assuming no common stock was issued during 2018.
To do this, the income statement is first prepared by ignoring tax as follows:
Fightin' Blue Hens Corporation
Income Statement
for the year ended December 31, 2018.
Details $
Service Revenue 300,000
Salaries Expense (200,000)
Rent Expense (10,000)
Depreciation Expense (20,000)
Interest Expense <u> (3,000) </u>
Earnings for the year <u> 67,000 </u>
Therefore, we have:
Fightin' Blue Hens Corporation
Statement of Stockholder Equity
for the year ends December 31, 2018
Details $
Common stock 100,000
Retained Earnings 40,000
Earnings for the year <u> 67,000</u>
Stockholder Equity <u> 207,000 </u>
2. Prepare a classified balance sheet as of December 31, 2018.
A balance sheet is a balance sheet that have different classifications suchas fixed assets, current assets and liabilities, long-term liabilities, and stockholder equity. This can be prepared as follows:
Fightin' Blue Hens Corporation
Classified Balance Sheet
for the year ends December 31, 2018
Details $ $
<u>Fixed Assets</u>
Equipment 200,000
Accumulated Depreciation <u> (115,000) </u>
Net Fixed Assets 85,000
<u>Current Assets</u>
Cash 10,000
Accounts Receivable 130,000
Prepaid Rent 4,000
Supplies <u> 20,000 </u>
Total current assets 164,000
<u>Current Liabilities</u>
Accounts Payable (10,000)
Salaries Payable (9,000)
Interest Payable <u> (3,000) </u>
Working capital 142,000
<u>Long-term Liabilities</u>
Notes Payable (due in two years) <u> (20,000) </u>
Net Total Assets <u> 207,000</u>
Financed by:
Common stock 100,000
Retained Earnings 40,000
Earnings for the year <u> 67,000</u>
Stockholder Equity <u> 207,000 </u>
Note: When a balance sheet is accurately prepared, the net total assets and the stockholder equity must be equal as above with both equaling $207,000.
