Prepare The Trial Balance For Smith Construction As Of May 3

Prepare the trial balance for Smith Construction as of May 31, 2010 listing the accounts in the proper order

The assignment requires preparing the trial balance for Smith Construction as of May 31, 2010, using the given account balances. The accounts should be listed in the proper order, typically starting with assets, followed by liabilities, and then stockholder's equity. The trial balance should accurately present the debits and credits to ensure that total debits equal total credits, serving as a foundational step for preparing financial statements.

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Smith Construction Trial Balance as of May 31, 2010, provides a snapshot of the company's financial position at the specified date. To prepare the trial balance, all accounts with their respective debit or credit balances are listed in an order that reflects conventional accounting practices. Assets, which have debit balances, are listed first, followed by liabilities with credit balances, and finally, stockholder's equity accounts. The goal of the trial balance is to verify the accuracy of the ledger postings by ensuring total debits equal total credits.

Based on the provided account balances, the trial balance for Smith Construction as of May 31, 2010, is as follows:

Total Debits: $91,000

Total Credits: $92,700

Note: The sum of debits and credits should be equal. If not, errors must be identified and corrected. Given the balances, a discrepancy exists—this suggests that either some account balances are missing or a correction is needed. For the purpose of this exercise, the balances should be adjusted to achieve equality, or the correct balances should be provided.

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The trial balance acts as the preliminary step towards creating formal financial statements. By meticulously listing all accounts with their respective balances, accountants verify the arithmetic accuracy of ledger postings. The presentation in proper order—assets first, followed by liabilities and equity—aligns with standard accounting conventions. Ensuring the debits equal credits affirms that the accounting equation remains balanced, providing confidence in the subsequent preparation of income statements, statements of retained earnings, and balance sheets.

Prepare the Income Statement for the period ending May 31 for Smith Construction

The income statement summarizes the company’s revenues and expenses for the period from March 1 through May 31, 2010. It demonstrates profitability by calculating net income or loss, essential for stakeholders to assess business performance. The period covers three months, and all relevant revenue and expense accounts during that time are included.

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The income statement for Smith Construction covering the period from March 1 to May 31, 2010, highlights the company’s financial performance over this quarter. The primary revenue component is service revenue, amounting to $51,700. Expenses incurred include repair expenses ($1,000), rent expenses ($2,000), and salary expenses ($10,780). Summing these expenses yields a total of $13,780.

The net income is calculated by subtracting total expenses from total revenues:

Net Income = Service Revenue – Total Expenses = $51,700 – $13,780 = $37,920

Thus, Smith Construction reported a net income of $37,920 for the three-month period. This positive figure indicates the company’s ability to generate profits from its operations, which is vital information for management, investors, and creditors.

Income Statement

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The income statement provides a clear depiction of the operational results of Smith Construction over the specified period. The significant net income of $37,920 signifies a profitable operation, essential for assessing the company’s financial health and planning future strategies.

Prepare the Statement of Retained Earnings for Smith Construction for the Period Ended May 31, 2010

The statement of retained earnings articulates changes in retained earnings over the period, starting with an initial balance of zero. It incorporates net income earned during the period and subtracts dividends paid out, resulting in the ending retained earnings balance, which appears on the balance sheet.

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Since the retained earnings start at zero as per the instructions, the statement of retained earnings for Smith Construction for the period March 1 through May 31, 2010, consolidates the impact of net income and dividends. Calculation steps include:

• Beginning retained earnings: $0
• Add: Net income for the period: $37,920
• Less: Dividends paid: $3,900

Ending retained earnings = $0 + $37,920 – $3,900 = $34,020

The statement thus reflects that Smith Construction has accumulated retained earnings of $34,020 at the end of May 2010, which will be reported as part of stockholders’ equity on the balance sheet.

Statement of Retained Earnings

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The statement of retained earnings effectively summarizes the changes in retained earnings over the given period. It demonstrates how profits earned are either retained or distributed, providing stakeholders with information about the company’s capacity for future investments and dividends.

Prepare the Balance Sheet for Smith Construction as of May 31, 2010

The balance sheet reports the company’s assets, liabilities, and stockholders’ equity as of May 31, 2010. It shows the financial position at a specific point in time, ensuring total assets equal the sum of liabilities and stockholders’ equity.

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Assets for Smith Construction include cash ($47,240), accounts receivable ($1,080), tools ($1,200), supplies ($1,500), and equipment ($24,000). Total assets sum to $75,020. Liabilities are represented by accounts payable, which is zero in this case, indicating no outstanding obligations.

Stockholders’ equity comprises common stock ($41,000) and retained earnings ($34,020). The total stockholders’ equity is $75,020, balancing with the assets.

The balance sheet, therefore, presents a healthy financial position, with assets financed solely by equity, highlighting a strong net worth.

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The balance sheet of Smith Construction encapsulates the company's financial stability at the end of the period. The assets, mainly cash, accounts receivable, supplies, tools, and equipment, total $75,020. Since liabilities are zero, the entire asset base is funded by shareholders’ equity, comprising common stock and retained earnings. This snapshot underscores the company's strong financial footing.

References

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