Please prepare income statement and retained earnings.

The 2015 balance sheet of the Stark Industries is attached. During 2016, the following events occurred.

1. On January 10, sell merchandise on account to Rayms $9,800 and Fischer $8,600. Terms 1/10, n/30. Freight $100 for each sale, F.O.B. shipping point.

2. On January 12, purchase merchandise on account from Zapfel $3,000 and Liotta $2,400. Terms 2/10, n/30. Freight $120 for each sale, F.O.B. destination.

3. On January 13, receive checks, $4,000 from Longhini and $2,000 from Hall, for sales on account after discount period has lapsed.

4. On January 15, send checks to Joosten for 9,000 less 2% cash discount, and to Maida for $11,000 less 1% cash discount.

5. On January 16, issue credit of $200 to Fieber for merchandise returned.

6. On January 18, summary daily cash sales total $17,520.

7. On January 21, pay off the balances to Zapfel and Liotta for the purchases on January 12.

8. On Feburary 9, receive payment in full from Rayms and Fischer.

9. On January 1, pay rent of $6,000 for a two-year term.

10. On April 1, sell merchandise on account to Dunlap $1,600, term 2/10, n/30. Freight $100, F.O.B. shipping point.

11. Pay $500 cash for office supplies on May 1.

12. Cash dividends totaling $900 are declared on June 13 and paid to stockholders on June 23.

13. Issue a note of $120,000 to bank (one year, annual interest rate 2%) for cash on July 1.

14. On July 5, purchase merchandise from Maida $33,000, terms 2/10, n/30.

15. On July 7, issue common stock 1000 shares, $10 par, in exchange of a land with a fair market value of $15,000.

16. On July 8, return $200 of merchandise to Maida and receive credit.

17. On August 1, sell merchandise to Lachey on account $80,000, term 1/10, n/30. Freight $1,500, F.O.B. shipping point.

18. On August 4, pay off the balance to Maida.

19. On August 10, receive half of the payment from Lachey.

20. On August 14, write off $1,300 bad debt for one account, Tooket.

21. On August 21, pay utilities expense, $10,092.

22. On August 31, Lachey pays off its balance.

23. On September 1, pay cash $7,500 to Farmington for merchandise purchased last year.

24. On October 1, pay off notes payable $110,000 and associated accrued interest $6,000, of which $1,500 was shown on the balance sheet.

25. Over the year, sales and office employees earned $45,500 in salaries and wages, of which $1,500 was still payable at the end of year.

26. An unpaid utilities bill (December, $1,250) is due on January 10 next year.

Additional Information at the end of the year:

1. Depreciation expense for the year was $13,250.

2. The company estimated that it has to pay federal income tax, $3,250.

3. After physically counting, the company decided that the ending inventories worth $40,146.

4. Based on its historical data, the company estimated that the bad debts were about 1% of net credit 2 sales.

5. Unearned revenue is decreased by $12,000.

6. The company expenses all of the supplies purchased during the year.

7. No insurance policy is effective during the year.

8. The company used the gross method to record its purchases and sales on credit.

9. The company adopts the periodic inventory system.

Instructions:

1. Prepare journal entries for each event.

2. Prepare adjusting entries.

3. Prepare adjusted trial balance.

4. Prepare Income Statement, Retained Earnings Statement, Balance Sheet, and Statement of Cash Flows.

5. Prepare closing entries.

Stark Industries

BALANCE SHEET

DECEMBER 31, 2015

Current Assets

Cash 42,200

Notes Receivable 16,000

Accounts Receivable 41,800

Less: Allowance for Doubtful Accounts (3,000)

Inventories 38,800

Prepaid Insurance 540

Prepaid Rent 600

Total Current Assets 136,940

Non-Current Assets

Long-term Investments I

nvestments in held-for-maturity securities 52,000

Land held for future development 45,500

Property, Plant, and Equipment Land 85,000

Buildings 675,000

Less: Accumulated Depreciation (187,500)

Intangible Assets Capitalized Development Costs 8,000

Goodwill 76,700 Other Identifiable Intangible Assets 48,000

Total Non-Current Assets 802,700

Total Assets 939,640

Current Liabilities

Notes Payable 110,000

Accounts Payable 32,000

Unearned Revenues 13,500

Income Taxes Payable 8,440

Property Taxes Payable 6,600

Interest Payable 1,500

Total Current Liabilities 172,040

Non-Current Liabilities

Provisions Related to Pensions 84,100

Bonds Payable 300,000

Total Non-Current Liabilities 384,100

Total Liabilities 556,140

Stockholders' Equity Common Stock 100,000

Preferred Stock 100,000

Paid-in-capital - Common Stock 27,500

Paid-in-capital - Preferred Stock 10,000

Retained Earnings 152,750

Accumulated Other Comprehensive Income 6,000

Less: Treasury Stock (12,750)

Total Stockholders' Equity 383,500

Total Liabilities and Stockholders' Equity 939,640

Use the following check figures for Project One.

Adjusted Trial Balance: Total $1,276,554

Income Statement:

Earning after income tax: $8,928

Retained Earnings Statement:

Retained Earnings: $160,778

Balance Sheet:

Inventory: $40,146

Total assets: $938,868

Statement of Cash Flows

Net cash flows from this year: ($1,274)

Cash (ending): $40,926

General Journal
Date	Description	Post Ref.	Debit	Credit
Jan. 1	Rent Expense		6,000
	Cash			6,000
	(Rent paid for two-year term)
Jan. 10	Account Receivable		18,400
	Freight-In		200
	Sales			18,400
	Cash			200
	(Sales on account terms 1/10,n/30 and Freight F.O.B)
Jan. 12	Merchandise		5,400
	Freight-In		240
	Accounts Payable			5,400
	Cash			240
	(Purchase Merchandise terms 2/10, n/30 and Freight F.O.B)
Jan. 13	Cash		6,000
	Accounts Receivable			6,000
	(Received payment from Longhini and Hall)
Jan. 15	Accounts Payable		19,600
	Cash Discount		400
	Cash			19,600
	(Paid Joosten with 2% discount and Maida with 1% discount)
Jan. 16	Inventory		200
	Accounts Receivable			200
	(Issued credit to Fieber for merchandise returned)
Jan. 18	Cash		17,520
	Sales Revenue			17,520
	(Daily cash sales total)
Jan. 21	Accounts Payable		5,400
	Cash			5,400
	(Paid balance to Zapfel and Liotta)
Feb. 9	Cash		18,400
	Accounts Receivable			18,400
	(Received payment from Rayms and Fischer)
Apr. 1	Account Receivable		1,600
	Freight-In		100
	Sales			1,600
	Cash			100
	(Sales on account terms 2/10,n/30 and Freight F.O.B)
May. 1	Office Supplies		500
	Cash			500
	(Purshased Supplies)
Jun. 13	Retained Earnings		900
	Dividends Payable			900
	(Dividends Declared)
Jun. 23	Dividends Payable		900
	Cash			900
	(Paid Dividends)
Jul. 1	Cash		120,000
	Notes Payable			120,000
	(Issue Note 1 year, annual interest rate 2%)
Jul. 5	Merchandise		33,000
	Accounts Payable			33,000
	(Purchase Merchandise terms 2/10, n/30)
Jul. 7	Land		15,000
	Common Stock			10,000
	Paid-in capital in excess of par			5,000
	(Issued Common Stock 1000 shares, $10 par, in exchange for land)
Jul. 8	Account Payable		200
	Inventory			200
	(Returned Merchandise to Maida and received credit)
Aug. 1	Accounts Receivable		80,000
	Freight-In		1,500
	Sales			80,000
	Cash			1,500
	(Sales on account term 2/10,n/30; Freight F.O.B)
Aug. 4	Accounts Payable		32,800
	Cash			32,800
	(Paid balance to Maida)
Aug. 10	Cash		36,000
	Sales Discounts		4,000
	Accounts Receivable			40,000
	(Received half payment from Lachey)
Aug. 14	Bad Debt Expense		$1,300
	Accounts Receivable			$1,300
	(Write off bad debt for Tooket)
Aug. 21	Utilities Expense		10,092
	Cash			10,092
	(Paid utilites expense)
Aug. 31	Cash		40,000
	Accounts Receivable			40,000
	(Received other half of payment from Lachey)
Sept. 1	Accounts Payable		$7,500
	Cash			$7,500
	(Paid for equiptment from Farmington purchased last year)
Oct. 1	Interest Expense		4,500
	Interest Payable			4,500
	(Record Accumulated interest)
Oct. 1	Notes Payable		110,000
	Interest Payable		4,500
	Cash			114,500
	(Paid off note payable plus interest)
Dec. 31	Salaries and Wages Expense		45,500
	Salaries and Wages Payable			45,500
	(Record salaries and wages earned)
Dec. 31	Salaries and Wages Payable		44,000
	Cash			44,000
	(Paid Sales and Office Employees)
Dec. 31	Utilities Expense		1,250
	Accounts Payable			1,250
	(Unpaid December utility bill)