Question

On December 31, 2021, Fighting Okra Cooking Services reports the following revenues and expenses.

Service revenue $75,500 Rent expense 18,800
Postage expense 1,550 Salaries expense 23,000
Legal fees expense 2,500 Supplies expense 18,000

In addition, the balance of common stock at the beginning of the year was $170,000, and the balance of retained earnings was $34,000. During the year, the company issued additional shares of common stock for $28,000 and paid dividends of $18,000.

Required:
a. Prepare an income statement.
b. Prepare a statement of stockholders' equity.

Answer 1

Answer and Explanation:

The preparation is presented below:

a. Income statement

Service revenue $75,500

Less expenses

Rent expense $18,800

Postage expense $1,550

Salaries expense $23,000

Legal fees expense $2,500

Supplies expense $18,000

Net income $11,650

b. statement of stockholders' equity

Common stock ($170,000 + $28,000) $198,000

Add: retained earnings ($34,000 + $11,650 - $18,000) $27,650

Stockholder equity $225,650