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Chapter 1: Q43PGA_c (page 45)

Picture Perfect Photography works weddings and prom-type parties. The balance of retained earnings was \(16,000 at December 31, 2017. At December 31, 2018, the business’s accounting records show these balances: Insurance Expense \) 6,000 Accounts Receivable $ 13,000 Cash 42,000 Notes Payable 14,000 Accounts Payable 11,000 Retained Earnings, Dec. 31, 2018 ? Advertising Expense 4,000 Salaries Expense 25,000 Service Revenue 75,000 Equipment 46,000 Dividends 8,000 Common Stock 28,000 Prepare the following financial statements for Picture Perfect Photography for the year ended December 31, 2018: a. Income statement. b. Statement of retained earnings. c. Balance sheet

Short Answer

Expert verified

Picture Perfect Photograph

Balance Sheet

December 31, 2018

Assets
Liabilities

Cash

$42,000

Accounts Payable

$11,000

Accounts Receivable

13,000

Notes Payable

14,000

Equipment

46,000

Total Liabilities

25,000

Stockholders’ Equity

Common Stock

28,000

Retained Earnings

48,000

Total Stockholders’ Equity

76,000

Total Assets

$101,000

Total Liabilities and Stockholders’ Equity

$101,000

Step by step solution

01

Explanation on Balance Sheet

Balance sheet reports the final balances of assets, liabilities, and stockholders’ equity at the end of particular accounting period.

02

Details of balance sheet

In the balance sheet, total assets equals $101,000, total liabilities equals $25,000, and total stockholders’ equity equals $76,000.

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Most popular questions from this chapter

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What does the going concern assumption mean for a business?

Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company’s creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Li to record the incoming cash as “construction revenue” instead of a loan. That would nudge the company’s income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid. Requirements 1. How would this action affect the year-end income statement? How would it affect the year-end balance sheet? 2. If you were one of the company’s creditors, how would this fraudulent action affect you?

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