Chapter 1, Problem 1.65AP

LO 3,4

(Learning Objectives 3, 4: Evaluate business operations; construct and analyze an income statement, a statement of retained earnings, and a balance sheet) The assets and liabilities of Oak Hill Garden Supply, Inc., as of December 31, 2018, and revenues and expenses for the year ended on that date are as follows:

Equipment .......................................	$110,000	Land .....................................................	$ 25,000
Interest expense ...............................	10,300	Note payable ......................	99,600
Interest payable ...............................	2,700	Property tax expense .................	7,400
Accounts payable .............................	26,000	Rent expense ......................	41,200
Salary expense ..................................	108,400	Accounts receivable ................	84,900
Building .............................................	406,000	Service revenue ....................	452,600
Cash ...............	44,000	Supplies ...................	5,300
Common stock .....................................	13,800	Utilities expense .................	8,800

Beginning retained earnings was $364,600, and dividends declared and paid totaled $107,000 for the year.

Requirements

1. 1. Prepare the income statement of Oak Hill Garden Supply, Inc., for the year ended December 31, 2018.
2. 2. Prepare the company’s statement of retained earnings for the year.
3. 3. Prepare the company’s balance sheet as of December 31, 2018.
4. 4. Analyze Oak Hill Garden Supply. Inc., by answering these questions:
5. a. Was Oak Hill profitable during 2018? By how much?
6. b. Did retained earnings increase or decrease? By how much?
7. c. Which is greater, total liabilities or total stockholders’ equity? Who has a greater claim to Oak Hill’s assets: its creditors or its stockholders?