Question

The adjusted trial balance for Chiara Company as of December 31, 2017, follows.

Debit Credit

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 30,000

Accounts receivable . 52,000

Interest receivable 18,000

Notes receivable (due in 90 days) . 168,000

Office supplies 16,000

Automobiles 168,000

Accumulated depreciation—Automobiles . \) 50,000

Equipment . 138,000

Accumulated depreciation—Equipment 18,000

Land . 78,000

Accounts payable . 96,000

Interest payable 20,000

Salaries payable . 19,000

Unearned fees 30,000

Long-term notes payable . 138,000

Common stock . 20,000

Retained earnings . 235,800

Dividends 46,000

Fees earned 484,000

Interest earned . 24,000

Depreciation expense—Automobiles 26,000

Depreciation expense—Equipment . 18,000

Salaries expense 188,000

Wages expense 40,000

Interest expense . 32,000

Office supplies expense . 34,000

Advertising expense . 58,000

Repairs expense—Automobiles . 24,800

Totals . \(1,134,800 \)1,134,800

Required

1. Use the information in the adjusted trial balance to prepare (a) the income statement for the year endedDecember 31, 2017; (b) the statement of retained earnings for the year ended December 31, 2017; and

(c) the balance sheet as of December 31, 2017.

2. Compute the profit margin for year 2017 (use total revenues as the denominator).

Short answer

The total assets are $600,000. Income statement, statement of retained earnings and balance sheet shown in step 2, 3 and 4 respectively.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of the income statement

The income statement is a statement that gives the amount of net income.

Income Statement

Income Statement
Year ending December 31, 2017
Delivery Fees Earned	$484,000
Other Income:
Interest Earned	$24,000
Total Income		$508,000
Less:
Depreciation Expense- Automobile	$26,000
Depreciation Expense- Equipment	$18,000
Salaries Expense	$188,000
Wage Expense	$40,000
Interest Expense	$$32,000
Office Supplies Expense	$34,000
Advertising Expense	$58,000
Repairs Expense- Automobile	$24,800	$420,800
Net Income		$87,200

Statement of retained earnings

Statement of Retained Earnings
For Year Ending December 31, 2017
Beginning Balance	$235,800
Net Income	$87,200
Dividends	-$46,000
Retained Earnings	$277,000

Balance Sheet

Balance Sheet
For the year ending December 31, 2017
Assets
Current Assets:
Cash	$30,000
Accounts Receivable	$52,000
Interest Receivable	$18,000
Notes Receivable	$168,000
Office Supplies	$16,000
Non-Current Assets
Automobile	$168,000
Accumulated Depreciation	-$50,000
Equipment	$138,000
Accumulated Depreciation	-$18,000
Land	$78,000
Total Assets		$600,000

Liabilities
Current Liabilities
Accounts Payable	$96,000
Salaries Payable	$19,000
Interest Payable	$20,000
Unearned Fees	$30,000
Long-term liabilities
Long-term Notes Payable	$138,000
Stockholder’s Equity
Common Stock	$20,000
Retained Earnings	$277,000
Total liabilities & Stockholder’s Equity		$600,000