EXERCISE 5.3

Financial Statement Preparation

Wilderness Guide Services, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The companys year-end adjusted trial balance dated December 31, current year, is as follows.

WILDERNESS GUIDE SERVICES, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, CURRENT YEAR
Cash	$12,200
Accounts receivable	31,000
Camping supplies	7,900
Unexpired insurance policies	2,400
Equipment	70,000
Accumulated depreciation: equipment		$60,000
Notes payable (due 4/1/next year)		18,000
Accounts payable		9,500
Capital stock		25,000
Retained earnings		15,000
Dividends	1,000
Guide revenue earned		102,000
Salary expense	87,500
Camping supply expense	1,200
Insurance expense	9,600
Depreciation expense: equipment	5,000
Interest expense	1,700
	$229,500	$229,500

1. Prepare an income statement and statement of retained earnings for the year ended December 31, current year. Also prepare the companys balance sheet dated December 31, current year. (Hint: Unprofitable companies have no income taxes expense.)

2. Does the company appear to be liquid? Defend your answer.

3. Has the company been profitable in the past? Explain.