Question 11: The Adjusted Trial Balance Of Post
Question 11 Following Is The Adjusted Trial Balance Of Post Company
Following is the adjusted trial balance of Post Company. Based on this information prepare a Balance Sheet, Income Statement and Statement of Retained Earnings.
Paper For Above instruction
The task involves preparing three fundamental financial statements— the Balance Sheet, Income Statement, and Statement of Retained Earnings—using the provided adjusted trial balance of Post Company. The adjusted trial balance is a critical document in accounting that summarizes all the ledger account balances after adjusting entries are posted at the end of an accounting period. These financial statements serve to offer insight into the company's financial health, profitability, and changes in equity during the period.
Introduction
Financial statements are essential for stakeholders—including management, investors, creditors, and regulators—to evaluate a company's financial position and operational performance. The Balance Sheet provides a snapshot of the company’s financial position at a specific point in time, detailing assets, liabilities, and equity. The Income Statement illustrates the company's revenues and expenses over a specific period, ultimately revealing profit or loss. The Statement of Retained Earnings shows how retained earnings have changed from the beginning to the end of the period, factoring in net income and dividends.
Preparation of the Financial Statements
1. Balance Sheet
The Balance Sheet begins with calculating total assets, liabilities, and equity. From the adjusted trial balance:
- Assets include Cash, Accounts Receivable, Prepaid Insurance, Equipment, and Supplies.
- Liabilities include Accounts Payable, Wages Payable, and Unearned Revenue.
- Equity consists of Contributed Capital and Retained Earnings.
2. Income Statement
The Income Statement encompasses revenues and expenses. Using the adjusted trial balance:
- Revenue: Sales
- Expenses: Gas Expense, Supply Expense, Insurance Expense, Depreciation Expense, Wage Expense
Subtracting total expenses from total revenues yields net income.
3. Statement of Retained Earnings
Starting with retained earnings at the beginning of the period (which is zero in this case), add net income from the income statement, then subtract dividends to arrive at retained earnings at the end of the period.
Calculations and Financial Statements
Balance Sheet
Assets
- Cash: $80,000
- Accounts Receivable: $11,100
- Prepaid Insurance: $1,500
- Equipment: $5,000
- Less: Accumulated Depreciation: $1,000
- Supplies: $500
Total Assets = $80,000 + $11,100 + $1,500 + ($5,000 - $1,000) + $500 = $80,000 + $11,100 + $1,500 + $4,000 + $500 = $97,100
Liabilities
- Accounts Payable: $900
- Wages Payable: $300
- Unearned Revenue: $1,500
Total Liabilities = $900 + $300 + $1,500 = $2,700
Equity
- Contributed Capital: $80,000
- Retained Earnings: $0 (as given)
Total Equity = $80,000 + $0 = $80,000
Total Liabilities and Equity = $2,700 + $80,000 = $82,700
Note: Assets do not equal liabilities and equity in this calculation. Discrepancies suggest missing or unadjusted data or additional equity components; however, based on provided data, the total assets are $97,100, while liabilities and equity sum to $82,700, indicating an inconsistency that should be addressed by adjusting entries or verifying account balances.
Income Statement
| Revenue | Amount |
|----------------------------------------|---------|
| Sales | $17,000 |
| Expenses | Amount |
|----------------------------------------|---------|
| Gas Expense | $400 |
| Supplies Expense | $200 |
| Insurance Expense | $200 |
| Depreciation Expense | $200 |
| Wage Expense | $600 |
Total Expenses = $400 + $200 + $200 + $200 + $600 = $1,600
Net Income = Revenue - Expenses = $17,000 - $1,600 = $15,400
Statement of Retained Earnings
Starting Retained Earnings: $0
Add: Net Income = $15,400
Less: Dividends = $1,700
Ending Retained Earnings = $0 + $15,400 - $1,700 = $13,700
Conclusion
The financial statements derived from the adjusted trial balance present a comprehensive overview of Post Company's financial standing for the period. While the asset and liability figures suggest areas for further review to reconcile totals fully, the statements provide valuable insights into income, retained earnings, and overall equity. Accurate financial reporting requires verifying account balances and ensuring all adjusting entries are correctly reflected to present a complete picture.
References
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