Question

Problem 2 – Preparing Financial Statements

The accountant for Farley Corporation prepared the following list from the company's accounting records for the year ended December 31, 20XX:

Service revenue	$18,500		Cash	$ 3,000
Accounts receivable	2,500	A	Farley, Drawing	5,000
Equipment	4,200	L	Supplies expense	1,800
Accounts payable	1,200	L	Rent expenses	3,400
Wages expense	5,000	L	Farley, Capital 1/1/20XX	8,000
Office supplies	800	A	Insurance expense	2,000

Required: Using the attached pages at the end of this document:

1.	Prepare an Income Statement for the year ended December 31, 20XX.
2.	Prepare a Statement of Owner’s Equity for the year ended December 31, 20XX.
3.	Prepare a Balance Sheet at December 31, 20XX.

Answer 1

Answer :

1. Income Statement for the year ended December 31, 20XX :

Particulars	Amount (in $)
Service revenue	18,500
Less : Expenses
Wages expense	5,000
L Supplies expense	1,800
L Rent expenses	3,400
A Insurance expense	2,000
Net Income	6,300

2. Statement of Owner’s Equity for the year ended December 31, 20XX.

Particulars	Amount (in $)
Capital as on 1/1/20XX	8,000
Add : Net Income	6,300
Less : Drawing	5,000
Capital as on 31/12/20XX	9,300

3. Balance Sheet at December 31, 20XX.

Assets	Amount (in $)	Liabilities	Amount (in $)
Non Current Assets		Current liabilities
Equipment	4,200	Accounts payable	1,200
Current Assets		Owner’s Equity
Office supplies	800	Capital as on 31/12/20XX	9,300
Accounts receivable	2,500
Cash	3,000
Total	10,500	Total	10,500