Q 50PGB-c - Horngren'S Financial And Managerial Accounting

Question

Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was \(20,000 at December 31, 2017. At December 31, 2018, the business’s accounting records show these balances: Insurance Expense \) 6,000 Accounts Receivable $ 5,000 Cash 42,000 Notes Payable 10,000 Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ? Advertising Expense 4,500 Salaries Expense 30,000 Service Revenue 115,000 Equipment 85,500 Dividends 13,000 Common Stock 28,000 Prepare the following financial statements for Pretty Pictures for the year ended December 31, 2018: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

Step-by-Step Solution

Answer

Pretty Pictures
Balance Sheet
December 31, 2018
Assets	Liabilities
Cash	$42,000	Accounts Payable	$13,000
Accounts Receivable	5,000	Notes Payable	10,000
Equipment	85,500	Total Liabilities	23,000
		Stockholders’ Equity
		Common Stock	28,000
		Retained Earnings	81,500
		Total Stockholders’ Equity	109,500
Total Assets	$132,500	Total Liabilities and Stockholders’ Equity	$132,500

Step-by-Step Solution Step 1: Explanation on Balance Sheet

Balance sheet indicates the balances of assets, liabilities, and owners’ equity for the particular accounting period.

Step 2: Details of balance sheet

In the balance sheet, total assets equals $132,500, total liabilities equals $23,000, and total stockholders’ equity equals $109,500.