The December 31, 2018, adjusted trial balance for the Blueboy Cheese Corporation

Question

The December 31, 2018, adjusted trial balance for the Blueboy Cheese Corporation is presented below. Account Title Debits Credits Cash 55,000 Accounts receivable 275,000 Prepaid rent 7,500 Inventory 40,000 Office equipment 500,000 Accumulated depreciation—office equipment 210,000 Accounts payable 50,000 Note payable (due in six months) 30,000 Salaries payable 6,500 Interest payable 1,000 Common stock 400,000 Retained earnings 95,000 Sales revenue 650,000 Cost of goods sold 390,000 Salaries expense 97,500 Rent expense 22,500 Depreciation expense 50,000 Interest expense 2,000 Advertising expense 3,000 Totals 1,442,500 1,442,500 Required: 1-a. Prepare an income statement for the year ended December 31, 2018. 1-b. Prepare a classified balance sheet as of December 31, 2018. 2. Prepare the necessary closing entries at December 31, 2018.

Explanation / Answer

Income statement Sales revenue 650000 Expense Cost of goods sold 390000 Salaries expense 97500 Rent expense 22500 Depreciation expense 50000 Interest expense 2000 Advertising expense 3000 Total expense 565000 Net income 85000 Retained earnings statement Beginning retained earnings 95000 Add net income 85000 Total 180000 Less dividend paid 0 Ending Retained earnings 180000 Classified balance sheet Assets Current assets Cash 55000 Accounts receivable 275000 Prepaid rent 7500 Inventory 40000 Total current assets 377500 Plant property and equipment Office equipment 500000 Accumulated depreciation equipment -210000 Total plant property and equipment 290000 Total assets 667500 Liabilities and stockholders equity Current liabilities Accounts payable 50000 Notes payable (due in 6 months) 30000 Salaries payable 6500 Interest payable 1000 Total current liabilities 87500 Stockholders equity Common stock 400000 Retained earnings 180000 Total stockholders equity 580000 Total liabilities and stockholders equity 667500 Closing entries Debit Credit 1 Sales revenue 650000              Income summary 650000 2 Income summary 565000 Cost of goods sold 390000 Salaries expense 97500 Rent expense 22500 Depreciation expense 50000 Interest expense 2000 Advertising expense 3000 3 Income summary 85000                Retained earnings 85000

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