ABC Consulting Services provides consulting services to small businesses. The following information is available for the year ending December 31, 2023:
1.Initial Balances and Transactions:
•Beginning balances: Cash $20,000, Accounts Receivable $15,000, Office Supplies $2,000, Accounts Payable $5,000, Unearned Revenue $10,000, Common Stock $22,000.
•Performed services worth $100,000; 70% collected in cash, 30% on account.
•Purchased office supplies worth $5,000, paid 60% in cash and 40% on account.
2.Adjusting Entries:
•Depreciation on office equipment was $4,000.
•Used office supplies amounting to $4,500.
•Accrued salaries and wages of $3,000.
•Earned $7,000 of the unearned revenue.
3.Additional Information:
•Paid salaries and wages of $40,000.
•Paid rent and utilities expenses totaling $12,000.
•Declared and paid dividends of $5,000.
Tasks:
1.Journal Entries:
•Prepare journal entries for the transactions and adjustments provided.
2.Trial Balance:
•Prepare a trial balance before and after the adjusting entries.
3.Financial Statements:
•Prepare the income statement, statement of retained earnings, and balance sheet for the year ending December 31, 2023.
4.Cash Flow Statement:
•Prepare the statement of cash flows using the direct method.
5.Analysis:
•Calculate the return on equity (ROE) and discuss the company’s profitability.