Q 49PGB-2 - Horngren'S Financial And Managerial Accounting

Question

Presented here are the accounts of Pembroke Bookkeeping Company for the year ended December 31, 2018: Land \( 10,000 Common Stock \) 29,000 Notes Payable 31,000 Accounts Payable 7,000 Property Tax Expense 3,100 Accounts Receivable 1,200 Dividends 28,000 Advertising Expense 12,000 Rent Expense 7,000 Building 147,400 Salaries Expense 64,000 Cash 2,800 Salaries Payable 800 Equipment 15,000 Service Revenue 192,000 Insurance Expense 1,700 Office Supplies 12,000 Interest Expense 6,600 Retained Earnings, Dec. 31, 2017 51,000 Requirements 1. Prepare Pembroke Bookkeeping Company’s income statement. 2. Prepare the statement of retained earnings. 3. Prepare the balance sheet.

Step-by-Step Solution

Answer

Statement of retained earnings is shown as follows:

Pembroke Bookkeeping Company
Statement of Retained Earnings
Year Ended December 31, 2018
Retained Earnings, December 31, 2017	$51,000
Net income for the year	97,600
	148,600
Dividends	(28,000)
Retained Earnings, December 31, 2018	$120,600

Step-by-Step Solution Step 1: Explanation on the statement of retained earnings

Statement of retained earnings represents the change in the beginning balance retained earnings.

Step 2: Explanation on retained earnings

Retained earnings indicates the profits of the prior or previous years.