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Prepare Snead Corporation’s 20X6 income statement statement of retained earnings and balance sheet List expenses except for income tax

Prepare Snead Corporation’s 20X6 income statement, statement of retained earnings, and balance sheet. List expenses (except for income tax) in decreasing order on the income statement and show total liabilities on the balance sheet. Draw arrows linking the three financial statements.

2. Snead’s lenders require that the company maintain a debt ratio no higher than 0.60. Compute Snead’s debt ratio at December 31, 20X6, to determine whether the company is in compliance with this debt restriction. If not, suggest a way that Snead could have avoided this difficult situation.

Snead Corporation Adjusted Trial Balance December 31, 20X6

   

Cash

$ 1,400

 

Accounts receivable

8,900

 

Supplies

2,300

 

Prepaid rent

1,600

 

Equipment

37,100

 

Accumulated depreciation

 

$ 4,300

Accounts payable

 

3,700

Interest payable

 

800

Unearned service revenue

 

600

Income tax payable

 

2,100

Note payable

 

18,600

Common stock

 

5,000

Retained earnings

 

1,000

Dividends

24,000

 

Service revenue

 

107,900

Depreciation expense

1,600

 

Salary expense

39,900

 

Rent expense

10,300

 

Interest expense

3,100

 

Insurance expense

3,800

 

Supplies expense

2,900

 

Income tax expense

7,100

 

Total

$144,000

$144,000

(Learning Objective 5: Closing the books and evaluating retained earnings) The accounts of Meadowbrook Services, Inc., at March 31, 20X3, are listed in alphabetical order.

Accounts payable

$14,700

Interest expense

$ 600

Accounts receivable

16,500

Note payable, long-term

2,800

Accumulated depreciation equipment

7,100

Other assets

6,200

Advertising expense

10,900

Prepaid expenses

14,100

Cash

7,500

Retained earnings, March 1, 20X2

5,300

Common stock

9,100

Salary expense

20,200

Current portion of note payable

800

Salary payable

17,800

Equipment

1,900

Service revenue

2,400

Depreciation expense

31,200

Supplies

94,100

Dividends

43,200

Supplies expense

3,800

   

Unearned service revenue

4,600

Required

1. All adjustments have been journalized and posted, but the closing entries have not yet been made. Journalize Meadowbrook’s closing entries at March 31, 20X3.

2. Set up a T-account for Retained Earnings and post to that account. Compute Meadowbrook’s net income for the year ended March 31, 20X3. What is the ending balance of Retained Earnings?

3. Did Retained Earnings increase or decrease during the year? What caused the increase or the decrease?

May 02 2020 Read more Less More

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