Question

Sleep Cheap is a private camping ground near the Boulder Peak Recreation Area. It has compiled the following financial information as of December 31, 2022.

Services revenues (from camping fees) $132,000
Dividends $8,000
Sales revenues (from general store) 25,000
Notes payable 50,000
Accounts payable 13,000
Administrative expenses 133,000
Cash 13,500
Supplies 2,500
Equipment 108,000
Common stock 40,000
Retained earnings (1/1/2022) 5,000

Required:
a. Determine net income from Sleep Cheap for 2022.
b. Prepare a retained earnings statement and a balance sheet for Sleep Cheap as of December 31, 2022.

Answer 1

Answer and Explanation:

a. The net income should be

Service Revenue $132,000  

Sales Revenue $25,000  

Total revenues $157,000  

Less: Total expense -$133,000  

Net income $24,000  

b.  

The preparation of the retained earning statement is presented below:

Retained Earnings Statement  

For the year ended December 31,2022  

Retained Earnings, January 1 $5,000  

Add: Net income $24,000  

Less: Dividends -$8,000  

Retained Earnings, December 31 $21,000  

The preparation of the balance sheet is presented below:

Balance Sheet  

December 31,2022

Assets  

Cash $13,500

Supplies  $2,500

Equipment $108,000

Total Assets $124,000

Liabilities and Stockholders' Equity  

Liabilities  

Accounts Payable $13,000  

Notes Payable $50,000  

Total Liabilities $63,000

Stockholders' Equity  

Common Stock $40,000  

Retained Earnings $21,000  

Total Stockholders' Equity  $61,000

Total Liabilities and Stockholders' Equity $124,000