Question

The December 31, 2016, credit balance of the Retained Earnings account was \(62,800. Anara Companyis required to make an \)8,400 payment on its long-term notes payable during 2018.

Required

1. Prepare the income statement and the statement of retained earnings for 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 calculate these ratios: (a) return on assets (total assetsat December 31, 2016, were \(160,000); (b) debt ratio; (c) profit margin ratio (use total revenuesas the denominator); and (d) current ratio. Round ratios to three decimals for parts aand c,and to twodecimals for parts band d.

ANARA COMPA. Account Title Debit Credit

101 Cash . \) 7,400

104 Short-term investments 11,200

126 Supplies . 4,600

128 Prepaid insurance . 1,000

167 Equipment . 24,000

168 Accumulated depreciation—Equipment \( 4,000

173 Building 100,000

174 Accumulated depreciation—Building . 10,000

183 Land . 30,500

201 Accounts payable 3,500

203 Interest payable 1,750

208 Rent payable 400

210 Wages payable 1,280

213 Property taxes payable . 3,330

233 Unearned professional fees . 750

251 Long-term notes payable 40,000

307 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000

318 Retained earnings . 62,800

319 Dividends . 8,000

401 Professional fees earned 59,600

406 Rent earned . 4,500

407 Dividends earned 1,000

409 Interest earned 1,320

606 Depreciation expense—Building 2,000

612 Depreciation expense—Equipment 1,000

623 Wages expense . 18,500

633 Interest expense 1,550

637 Insurance expense 1,525

640 Rent expense . 3,600

652 Supplies expense 1,000

682 Postage expense . 410

683 Property taxes expense 4,825

684 Repairs expense 679

688 Telephone expense . 521

690 Utilities expense 1,920

Totals \) 224,230 $ 224,230

Short answer

Total of assets is $164,700. Income statement shown in step 2. Statement of retained is shown in step 3 and balance sheet shown in step 4.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Income statement

Income statement is a financial statement that records all the revenues and expenses.

Income Statement

Income Statement
Year ending December 31, 2017
Professional Fees Earned	$59,600
Other Income:
Rent Earned	$4,500
Dividends Earned	$1,000
Interest Earned	$1,320
Total Income		$66,420
Less:
Depreciation Expense- Building	$2,000
Depreciation Expense- Equipment	$1,000
Wage Expense	$18,500
Insurance Expense	$1,525
Interest Expense	$1,550
Rent Expense	$3,600
Supplies Expense	$1,000
Postage Expense	$410
Property taxes expense	$4,825
Repairs Expense	$679
Telephone Expense	$521
Utility Expense	$1,920	$37,530
Net Income		$28,890

Statement of retained earnings

Statement of Retained Earnings
For Year Ending December 31, 2017
Beginning Balance	$62,800
Net Income	$28,890
Dividends	-$8,000
Retained Earnings	$83,690

Balance Sheet

Balance Sheet
For the year ending December 31, 2017
Assets
Current Assets:
Cash	$7,400
Short-term Investment	$11,200
Supplies	$4,600
Prepaid Insurance	$1,000
Non-Current Assets
Equipment	$24,000
Accumulated Depreciation	-$4,000
Building	$100,000
Accumulated Depreciation	-$10,000
Land	$30,500
Total Assets		$164,700
Liabilities
Current Liabilities
Accounts Payable	$3,500
Interest Payable	$1,750
Property Tax Payable	$3,330
Rent Payable	$400
Wages Payable	$1,280
Unearned Professional Fees	$750
Long-term liabilities
Notes Payable	$40,000
Stockholder’s Equity
Common Stock	$30,000
Retained Earnings	$83,690
Total liabilities & Stockholder’s Equity		$164,700