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he accountant for a company, XYZ Ltd., and you need to prepare the financial statements for the year ending December 31, 2023. Below is the trial balance of XYZ Ltd. as of December 31, 2023, and additional information to help you prepare the financial statements.

Trial Balance:

  • Cash: $15,000
  • Accounts Receivable: $25,000
  • Inventory: $40,000
  • Prepaid Expenses: $5,000
  • Equipment: $60,000
  • Accumulated Depreciation (Equipment): $10,000
  • Accounts Payable: $12,000
  • Notes Payable: $20,000
  • Common Stock: $30,000
  • Retained Earnings: $12,000
  • Sales Revenue: $150,000
  • Cost of Goods Sold: $90,000
  • Salaries Expense: $20,000
  • Rent Expense: $10,000
  • Interest Expense: $2,000
  • Utilities Expense: $3,000

Additional Information:

  1. Depreciation: The equipment has an estimated useful life of 10 years with no residual value. Compute the annual depreciation expense.
  2. Interest Payable: Interest accrued on notes payable for the last month of the year is $500.
  3. Prepaid Expenses: Prepaid expenses at year-end are $3,000. The remaining $2,000 should be recognized as an expense.
  4. Inventory Adjustment: The ending inventory balance is $42,000, an adjustment from the trial balance.
  5. Income Tax Rate: The income tax rate is 25%.


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