The following data were taken from the accounting records of Li Company at December 31, Year 1. All adjustments have been recorded.Service revenue166,000Retained earnings95,000Accounts receivable26,500Salaries expense88,000Operating expense15,400Accounts payable22,800Supplies expense760Prepaid rent4,000Common stock90,000Supplies400Dividends2,400Insurance expense1,600Rent expense20,000Unearned revenue1,530Required:a) Prepare an income statement for Li Company for Year 1.b) Determine the balance in retained earnings at the end of Year 1.
What will be an ideal response?
a)
Li Company
| Income Statement |
| For the Year Ended December 31, Year 1 |
| Service revenue | $166,000 |
| Salaries expense | 88,000 |
| Operating expense | 15,400 |
| Insurance expense | 1,600 |
| Rent expense | 20,000 |
| Supplies expense | 760 | 125,760 |
| Net Income | $40,240 |
b)
| Beginning retained earnings | $ 95,000 |
| Add: Net income | 40,240 |
| Less: Dividends | (2,400) |
| Ending retained earnings | $132,840 |
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