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