Question

The adjusted trial balance for Tybalt Construction as of December 31, 2017, follows. Problem 3-8A

TYBALT CONSTRUCTION

Adjusted Trial Balance

December 31, 2017

No. Account Title Debit Credit

101 Cash . \( 5,000

104 Short-term investments 23,000

126 Supplies . 8,100

128 Prepaid insurance . 7,000

167 Equipment . 40,000

168 Accumulated depreciation—Equipment \) 20,000

173 Building 150,000

174 Accumulated depreciation—Building . 50,000

183 Land . 55,000

201 Accounts payable 16,500

203 Interest payable 2,500

208 Rent payable 3,500

210 Wages payable 2,500

213 Property taxes payable . 900

233 Unearned professional fees . 7,500

251 Long-term notes payable 67,000

307 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

318 Retained earnings . 121,400

319 Dividends . 13,000

401 Professional fees earned 97,000

406 Rent earned . 14,000

407 Dividends earned 2,000

409 Interest earned 2,100

606 Depreciation expense—Building 11,000

612 Depreciation expense—Equipment 6,000

623 Wages expense . 32,000

633 Interest expense 5,100

637 Insurance expense 10,000

640 Rent expense . 13,400

652 Supplies expense 7,400

682 Postage expense . 4,200

683 Property taxes expense 5,000

684 Repairs expense 8,900

688 Telephone expense . 3,200

690 Utilities expense 4,600

Totals \( 411,900 \) 411,900

The December 31, 2016, credit balance of the Retained Earnings account was \(121,400. Tybalt

Construction is required to make a \)7,000 payment on its long-term notes payable during 2018.

Required

1. Prepare the income statement and the statement of retained earnings for the calendar year 2017 and theclassified balance sheet at December 31, 2017.

2. Prepare the necessary closing entries at December 31, 2017.

3. Use the information in the financial statements to compute these ratios: (a) return on assets (total assetsat December 31, 2016, was $200,000); (b) debt ratio; (c) profit margin ratio (use total revenues asthe denominator); and (d) current ratio. Round ratios to three decimals for parts aand c,and to two

decimals for parts band d.

Short answer

The income summary account was debited with $110,800.

Step-by-step solution

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

The Income statement is the type of financial statement used to records all the revenues and expenses of the accounting period.

Closing entries

Date	Particulars	Debit	Credit
December 31	Income Summary	$110,800
	Depreciation Expense- Building		$11,000
	Depreciation Expense- Equipment		$6,000
	Wage Expense		$32,000
	Insurance Expense		$5,100
	Interest Expense		$10,000
	Rent Expense		$13,400
	Supplies Expense		$7,400
	Postage Expense		$4,200
	Property taxes expense		$5,000
	Repairs Expense		$8,900
	Telephone Expense		$3,200
	Utility Expense		$4,600
	(Closing of all expenses against income summary)
December 31	Revenue	$115,100
	Income Summary		$115,100
	(Transferring service revenue into income summary)
December 31	Income summary	$4,300
	Retained Earnings		$4,300
	(Transferring net income into retained earnings)
December 31	Retained Earnings	$13,000
	Dividends		$13,000
	(Payment of dividends)