Chapter 1, Problem 1.71BP

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 Full Moon Products, Inc., as of December 31, 2018. and revenues and expenses for the year ended on that date are as follows:

Equipment .......................................	$115,000	Land ..........................................	$ 29,000
Interest expense ...............................	10,000	Note payable ......................	99,200
Interest payable ...............................	2,800	Property tax expense .................	7,300
Accounts payable .............................	25,000	Rent expense ......................	41,000
Salary expense ..................................	108,900	Accounts receivable ................	85,000
Building .............................................	405,000	Service revenue ....................	451,600
Cash ...............	46,000	Supplies ...................	6,200
Common stock .....................................	26,100	Utilities expense .................	8,100

Beginning retained earnings was $364,800, and dividends declared and paid totaled $108,000 for the year.

Requirements

1. 1. Prepare the income statement of Full Moon Products, 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 Full Moon Products, Inc., by answering these questions:
5. a. Was Full Moon 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 Full Moon Products’ assets: its creditors or its stockholders?