Mgsc312

Applying your understanding of the relationships among the financial statements:
Question 1 25 marks
The assets and liabilities of Toronto Service Inc. as of December 31, 2008, and revenue and expenses for the year ended December 31, 2008 are listed below:
Accounts Payable|$21,000||Property tax expense|$5,000|
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Accounts Receivable|25,000||Rent expense|3,000|
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Advertising expense|10,000||Salary expense|85,000|
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Building|140,000||Salary payable|12,000|
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Cash|10,000||Service Revenue|200,000|
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Furniture|20,000||Share Capital|75,000|
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Interest expense|4,000||Supplies|3,000|
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Land|98,000||Note Payable|95,000|
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Beginning Retained Earnings were $50,000 and dividends totalled $50,000 for the year.
Required:
a. Prepare the Income Statement for the year ended December 31, 2008 (5 marks)
TORONTO SERVICES INC
INCOME STATEMENT
Year Ended December 31, 2008
REVENUE
Service Revenue 200,000
TOTAL REVENUE 200,000

EXPENSES
Advertising Expense 10,000
Interest Expense 4,000
Preperty Tax Expense 5,000
Rent Expense 3,000
Salary Expense 85,000
TOTAL EXPENSE 107,000

NET INCOME 93,000

b. Prepare the Statement of Retained Earnings for the year (5 marks)
TORONTO SERVICES INC
STATEMENT OF RETAINED EARNINGS
December 31, 2008
Opening Retained Earnings 50,000
Add: Net Income 93,000 143,000
Less: Dividends (50,000)
Ending Retained Earnings 93,000
c. Prepare the Balance Sheet at December 31, 2008 (7 marks)
TORONTO SERVICES INC
BALANCE SHEET
December 31, 2008
ASSETS
Cash 10,000
Accounts Recievable 25,000
Supplies 3,000
Furniture 20,000
Building 140,000
Land 98,000
TOTAL ASSETS 296,000

LIABILITIES
Accounts Payable 21,000
Salary Payable 12,000
Note Payable 95,000
TOTAL LIABILITIES 128,000

SHAREHOLDERS EQUITY
Share Capital 75,000
Retained Earnings