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Building Financial Statements

Prepare income statement, retained earnings statement, and balance sheet for Eastern Corporation using available information for the year ended December 31, 2018.

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Building Financial Statements

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  1. Building Financial Statements Eastern Corporation began operations on January 1, 2018. The following information is available for Eastern Corporation on December 31, 2018: service revenue $17,000; accounts payable $2,000; common stock $10,000; equipment $16,000; supplies expense $200; dividends $600; accounts receivable $4,000; building rental expense $9,000; notes payable $5,000; retained earnings $???; insurance expense $1,000; supplies $1,800; and cash $1,400. Prepare an income statement, a retained earnings statement, and a balance sheet using this information.

  2. Eastern CorporationIncome StatementFor the Year Ended December 31, 2018 1st- head up the statement • name of company • name of statement • period of time covered

  3. Eastern CorporationIncome StatementFor the Year Ended December 31, 2018 Revenues Service revenue $17,000 2nd - List the revenues

  4. Eastern CorporationIncome StatementFor the Year Ended December 31, 2018 Revenues Service revenue $17,000Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) 3rd - List and total the expenses

  5. Eastern CorporationIncome StatementFor the Year Ended December 31, 2018 Revenues Service revenue $17,000Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) Net Income $ 6,800 4th - Subtract expenses from revenues to obtain net income.

  6. Eastern CorporationRetained Earnings StatementFor the Year Ended December 31, 2018 1st- head up the statement • name of company • name of statement • period of time covered

  7. Eastern CorporationRetained Earnings StatementFor the Year Ended December 31, 2018 Retained earnings, January 1 $ 0 2nd - Start with beginning retained earnings

  8. Eastern CorporationRetained Earnings StatementFor the Year Ended December 31, 2018 Retained earnings, January 1 $ 0 Add: Net Income 6,800 3rd - Add net income from the current year

  9. Eastern CorporationRetained Earnings StatementFor the Year Ended December 31, 2018 Retained earnings, January 1 $ 0 Add: Net Income 6,800 Less: Dividends (600) Retained earnings, December 31 $ 6,200 4th - Subtract current year’s dividends and total

  10. Eastern CorporationBalance Sheet December 31, 2018 1st - head up the statement • name of company • name of statement • date

  11. Eastern CorporationBalance Sheet December 31, 2018 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 2nd - list the assets and total

  12. Eastern CorporationBalance Sheet December 31, 2018 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 3rd - list the liabilities and sub-total

  13. Eastern CorporationBalance Sheet December 31, 2018 4th - list stockholders’ equity subtotal. Add to liabilities, Total If total assets and total liabilities & stockholders’ equity equal…double underline.

  14. Eastern CorporationBalance Sheet December 31, 2018 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 Stockholders’ equity Common stock 10,000 Retained earnings 6,200 Total Stockholders’ equity 16,200 Total liabilities and stockholders’ equity $23,200

  15. In what order are financial statements prepared? WHY?

  16. Eastern CorporationIncome StatementFor the Year Ended December 31, 2018 Revenues Service revenue $17,000Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) Net Income $ 6,800 Net Income is needed for the Statement of Retained Earnings.

  17. Eastern CorporationRetained Earnings StatementFor the Year Ended December 31, 2018 Retained earnings, January 1 $ 0 Add: Net Income 6,800 Less: Dividends (600) Retained earnings, December 31 $ 6,200 Ending Retained Earnings is needed for the balance sheet.

  18. Eastern CorporationBalance Sheet December 31, 2018 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 Stockholders’ equity Common stock 10,000 Retained earnings 6,200 Total Stockholders’ equity 16,200 Total liabilities and stockholders’ equity $23,200

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