The adjusted trial balance columns for William Company are as follows on Dec 31,

Question

The adjusted trial balance columns for William Company are as follows on Dec 31, 2014. Debit Credit 101 Cash 17,800 a) Prepare an income statement, a retained earnings statement, and a classified balance sheet, Dec 31, 2014. 112 Accounts Receivable 14,400    (Note: $5,000 of the notes payable become due in 2015.) 126 Supplies 2,300 130 Prepaid Insurance 4,400 151 Equipment 46,000 152 Accumulated Depreciation-Equip 18,000 200 Notes Payable 20,000 201 Accounts Payable 8,000 212 Salaries and Wages Payable 2,600 230 Interest Payable 1,000 311 Common Stock 15,000 320 Retained Earnings 9,800 332 Dividends 12,000 b) Prepare the closing entries 400 Service Revenue 86,200 610 Advertising Expense 10,000 631 Supplies Expense 3,700 711 Depreciation Expense 6,000 722 Insurance Expense 4,000 726 Salaries and Wages Expense 39,000 905 Interest Expense 1,000 Totals 160,600 160,600 c) Calculate Gross profit rate and profit margin The adjusted trial balance columns for William Company are as follows on Dec 31, 2014. Debit Credit 101 Cash 17,800 a) Prepare an income statement, a retained earnings statement, and a classified balance sheet, Dec 31, 2014. 112 Accounts Receivable 14,400    (Note: $5,000 of the notes payable become due in 2015.) 126 Supplies 2,300 130 Prepaid Insurance 4,400 151 Equipment 46,000 152 Accumulated Depreciation-Equip 18,000 200 Notes Payable 20,000 201 Accounts Payable 8,000 212 Salaries and Wages Payable 2,600 230 Interest Payable 1,000 311 Common Stock 15,000 320 Retained Earnings 9,800 332 Dividends 12,000 b) Prepare the closing entries 400 Service Revenue 86,200 610 Advertising Expense 10,000 631 Supplies Expense 3,700 711 Depreciation Expense 6,000 722 Insurance Expense 4,000 726 Salaries and Wages Expense 39,000 905 Interest Expense 1,000 Totals 160,600 160,600 c) Calculate Gross profit rate and profit margin

Explanation / Answer

Income statement Service revenue 86,200 less: Expenses: Advertising expenses 10,000 Supplies expense 3,700 Depreciation expense 6,000 Insurance expense 4,000 Salaries and wages expense 39,000 interest expense 1,000 total expenses -63,700 Net income 22,500 Retained earnings statement opening balance of retained earnigns 9,800 Add : Net income of the year 22,500 less: dividend paid during the year -12,000 closing balance of retained earnings 20,300 Balance sheet Assets: Cash 17,800 Accounts receivable 14,400 supplies 2,300 Prepaid insurance 4,400 Total current assets 38,900 PP&E Equipment 46,000 less: Accumulated depreciation -18,000 total fixed asset 28,000 Total assets 66,900 current liabilities notes payable (current portion) 5,000 Accounts payable 8,000 Salaires and wages payable 2,600 interest payable 1,000 total current liabilties 16,600 long term liability notes payable 15,000 shareholder's equity common stock 15,000 retained earnings 20,300 total stockholders and R.E. 35,300 total stockholders and R.E. and liabilities 66,900 Closing entries Debit Credit service revenue 86,200 To income summary 86,200 Income summary 63,700 To Advertising expenses 10,000 to supplies expense 3,700 Depreciation expense 6,000 to insurance expense 4,000 to salaries and wages expense 39,000 interest expense 1,000 income summary 22,500 To Retained earnings 22,500 Gross profit cannot be calculated since there is no cost of goods sold Profit margin = Net income/ sales 26.10%

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