Q11SE - Horngren'S Financial And Managerial Accounting

Question

Camilia Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:

Cash \( 2,900                                    Cost of Goods Sold \) 18,700

Selling Expenses 1,400                            Equipment, net 9,500

Accounts Payable 4,300                           Accrued Liabilities 1,800

Common Stock 4,365                                Net Sales Revenue 29,200

Notes Payable, long-term 500                 Accounts Receivable 3,200

Merchandise Inventory 1,100                  Interest Expense 65

Administrative Expenses 3,300

Requirements

1. Prepare Camilia Communication’s statement of retained earnings for the year ended July 31, 2018. Assume that there were no dividends declared during the year and that the business began on August 1, 2017. 

2. Prepare Camilia Communication’s classified balance sheet at July 31, 2018. Use the report format.

 

Step-by-Step Solution

Answer

Answer

1. Balance in the statement of retained earnings is $5,735. 
2. Total assets and liabilities is $16,700.

Step 1: Meaning of Balance Sheet

A balance sheet refers to a report prepared by the business entity on a particular date. It reflects the position of a business’s assets and liabilities at a particular point in time and facilitates the users to determine the financial health of the company.

 

Step 2: Preparation of retained earnings statement

Camilia Communications
Statement of Retained Earnings
For the year ended July 31, 2018
Particulars	Amounts ($)
Opening balance of retained earnings	0
Add: Net income	5,735
Less: Dividends declared	0
Closing balance of retained earnings	5,735

Step 3: Preparation of classified balance sheet

Camilia Communications
Balance Sheet
As on July 31, 2018
Particulars	Details	Amounts ($)
ASSETS
Current Assets
Cash	2,900
Accounts receivables	3,200
Merchandise inventory	1,100
Total Current Assets		7,200
Non-Current Assets
Equipment, net	9,500
Total Non-Current Assets		9,500
Total Assets		16,700
EQUITY & LIABILITIES
Current Liabilities
Accounts payable	4,300
Accrued liabilities	1,800
Total Current Liabilities		6,100
Non-Current Liabilities
Notes payable, long-term	500
Total Non-Current Liabilities		500
Total Liabilities		6,600
Stockholder’s equity
Common stock	4,365
Retained earnings	5,735
Total Stockholder’s equity		10,100
Total Equity & Liabilities		16,700