Required: Using the information generated in the Wyatt Excel Project from Ch. 3, prepare a multiple step income statement for the year ended December 31, 2021 and a classified balance sheet as of December 31, 2021 in proper form. Please make sure to check your Excel project submissions for errors (solutions have been posted in the Ch. 3 folder) and use the corrected numbers to prepare the financial statements. You must use Excel to prepare the financial statements. I would recommend correcting the original submitted file and adding a worksheet for both the income statement and balance sheet. When preparing the income statement, you do not need to break out operating expenses between selling and general/administrative expenses.

The following information needs to be considered when preparing the financial statements:

A component that Wyatt tracks for financial reporting purposes is being sold in 2022 and should be classified as discontinued operations on the income statement. Wyatt has already determined that the expected selling price is greater than the book value of the component at 12/31/2021. The income statement numbers in the adjusted trial balance (generated in your excel project) currently reflect the following amounts related to the component:

Sales revenues Cost of goods sold Income tax expense

$250,000 100,000 12,000

*Note: for simplicity, ignore the breakout of discontinued operations on the balance sheet, though this would be required for reporting purposes*

• Regarding common stock: 100,000 shares have been authorized. 50,000 were outstanding on January 1, 2021. The company issued another 25,000 shares on October 1, 2021. The common stock has a par value of $0.50.

• Regarding investments: Of the $200,000 in investments, investments in debt securities that mature in 10 years total $150,000; investments in equity securities that the company intends to sell within the next calendar year total $50,000.

• Regarding notes payable, a $70,000 note is due 7/15/2022. The remainder of the notes included in the notes payable balance are due in 2024 and beyond.

• Note that in addition to the items mentioned above, there may be circumstances provided in the initial Wyatt instructions that will affect reporting on the balance sheet.

STEP #2: Adjusting Entries Debit Credit Hard key numbers Formula driven Link to cells Trial Balance Debit Credit 540,000 135,000 37,000 365,000 30,000 200,000 300,000 2,600,000 625,000 6.250 STEP #6: Post Closing Trial Balance Debit Credit 540,000 135,000 37,000 365,000 30,000 200,000 300,000 2,600,000 631,250 100,000 196,000 30,000 66,000 16,500 650,000 42,500 884,000 1,578,250 138,500 100,000 196,000 30,000 Account Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Expenses Investments Land Plant and Equipment Accumulated Depreciation Goodwill Accounts Payable Income Tax Payable Unearned Revenue Interest Payable Notes Payable Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Dividends Sales Revenue Cost of Goods Sold Rent Expense Insurance Expense Salaries Expense Bad Debt Expense Depreciation Expense Interest Expense Income Tax Expense 66,000 15,000 STEP #3: Adjusted Trial Balance Debit Credit 540,000 135.000 37,000 365,000 30.000 200,000 300,000 2,600,000 631,250 100.000 196,000 30,000 66,000 16,500 650,000 42,500 884,000 1,327,500 138,500 15,000 964,000 280,000 18,000 80,000 200.000 8.000 41.250 21.000 50,000 4,983,250 4,983,250 1,500 650,000 42,500 884,000 1,327,500 138,500 15,000 1,030,000 66,000 30,000 280,000 48,000 80,000 200,000 8,000 35,000 6,000 50,000 4,962,000 6,250 15,000 4,962,000 117,250 117,250 4,270,000 4,270,000 STEP #1: ADJUSTING JOURNAL ENTRIES Account Debit Credit Account # Note 1: 4010 2130 66,000 Sales Revenue Unearned Revenue STEP #4: NET INCOME 964,000 (698,250) 265,750 Revenues Expenses Net Income 66,000 Note 2: 5150 1690 6,250 Depreciation Expense Accumulated Depreciation 6,250 Note 3: 1410 5110 30,000 Prepaid Expenses Rent Expense STEP #5: RETAINED EARNINGS Beginning Retained Earnings 1,327,500 Net Income 265,750 Dividends (15,000) Ending Retained Earnings 1,578,250 30,000 Note 4: 5160 2140 15,000 Interest Expense Interest Payable 15,000 STEP #2: Adjusting Entries Debit Credit Hard key numbers Formula driven Link to cells Trial Balance Debit Credit 540,000 135,000 37,000 365,000 30,000 200,000 300,000 2,600,000 625,000 6.250 STEP #6: Post Closing Trial Balance Debit Credit 540,000 135,000 37,000 365,000 30,000 200,000 300,000 2,600,000 631,250 100,000 196,000 30,000 66,000 16,500 650,000 42,500 884,000 1,578,250 138,500 100,000 196,000 30,000 Account Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Expenses Investments Land Plant and Equipment Accumulated Depreciation Goodwill Accounts Payable Income Tax Payable Unearned Revenue Interest Payable Notes Payable Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Dividends Sales Revenue Cost of Goods Sold Rent Expense Insurance Expense Salaries Expense Bad Debt Expense Depreciation Expense Interest Expense Income Tax Expense 66,000 15,000 STEP #3: Adjusted Trial Balance Debit Credit 540,000 135.000 37,000 365,000 30.000 200,000 300,000 2,600,000 631,250 100.000 196,000 30,000 66,000 16,500 650,000 42,500 884,000 1,327,500 138,500 15,000 964,000 280,000 18,000 80,000 200.000 8.000 41.250 21.000 50,000 4,983,250 4,983,250 1,500 650,000 42,500 884,000 1,327,500 138,500 15,000 1,030,000 66,000 30,000 280,000 48,000 80,000 200,000 8,000 35,000 6,000 50,000 4,962,000 6,250 15,000 4,962,000 117,250 117,250 4,270,000 4,270,000 STEP #1: ADJUSTING JOURNAL ENTRIES Account Debit Credit Account # Note 1: 4010 2130 66,000 Sales Revenue Unearned Revenue STEP #4: NET INCOME 964,000 (698,250) 265,750 Revenues Expenses Net Income 66,000 Note 2: 5150 1690 6,250 Depreciation Expense Accumulated Depreciation 6,250 Note 3: 1410 5110 30,000 Prepaid Expenses Rent Expense STEP #5: RETAINED EARNINGS Beginning Retained Earnings 1,327,500 Net Income 265,750 Dividends (15,000) Ending Retained Earnings 1,578,250 30,000 Note 4: 5160 2140 15,000 Interest Expense Interest Payable 15,000