1. Preparation of financial statements

Using the Adjusted Trial Balance shown below, prepare the companys:

(a) Income Statement

(b) Statement of Retained Earnings

(c) Balance Sheet

by completing the tables provided on the following pages.

All Star Repair Shop Adjusted Trial Balance Dec. 31, 2016
	Debit	Credit
Cash	$ 25,000
Supplies	2,000
Accounts Receivable	70,000
Equipment	30,000
Accumulated Depreciation on Equipment		$ 10,000
Accounts Payable		20,000
Notes Payable		5,000
Income Taxes Payable		20,000
Capital Stock		30,000
Retained Earnings (as of Jan 1, 2016)		5,000
Dividends	15,000
Repair Service Sales Revenue		125,000
Wages Expense	35,000
Rent Expense	10,000
Supplies Expense	4,000
Utilities Expense	3,000
Depreciation Expense	1,000
Income Tax Expense	20,000	______
	215,000	215,000

#2 Below is a series of accounts for the Whitman Company, numbered for identification. Following the accounts is a series of transactions. For each transaction, indicate the account(s) that should be debited and credited in the required journal entry(s) by entering the appropriate account number(s) to the right of each transaction.

Acct. #	Account Title
1	Accounts receivable
2	Accounts payable
3	Sales Revenue
4	Inventory
5	Cash
6	Cost of Goods Sold
7	Notes Receivable
8	Income taxes payable
9	Interest Revenue
10	Interest Receivable
11	Allowance for Doubtful Accounts
12	Bad Debt Expense

Transactions	Debit	Credit
Example: On March 1, 2016, Whitman Co. paid its suppliers $20,000 that it owed for merchandise it bought on credit in the previous month.	2	5
A. On March 30, 2016, Whitman Co. sells $50,000 of merchandise to customers on credit. The merchandise originally cost Whitman $30,000.
B. On March 31, 2016 the appropriate bad debt expense was recorded using 2% of credit sales as an estimate.
C. On April 1, 2016 Whitman determined that $500 of its first quarter credit sales were uncollectible and was written off.
D. On Oct. 1, 2015, Whitman provided one of its customers with a $10,000, 1 year, 12% loan. Interest is paid twice on March 31, 2016 and at maturity on Sept. 30, 2016. What journal entry did Whitman make on Oct. 1, 2015?
E. On Sept. 30, 2016 what journal entries will Whitman make regarding the loan?

Hints: Transactions B, C, D each have only one debit and one credit.

Transaction A had 2 debits and 2 credits.

Transaction E has one debit and three credits.

3

On Jan 1, Bike Mart had a beginning inventory of 20 bicycles which it purchased for $350 each.

During January, the company purchases four more bicycles for $400 each. None were sold in January.

On February 15, the company purchases five more bicycles for $450 each.

Between February 16 and 28, Bike Mart sells 10 of these bicycles.

a.) Calculate Bike Marts Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the FIFO Method. (show all work.)

b.) Calculate Bike Marts Ending Inventory Balance (in dollars) at the end of February and Cost of Goods Sold through February using the Weighted Average Method. (show all work.)

c.) At the end of February, will Bike Marts Net Income (profits) on its Income Statement be higher if it uses the FIFO or Weighted Average Inventory Method? Why?