Chapter 2, Problem 2.12E

Financial statements and closing entries

• LO2–6, LO2–7

The December 31, 2018, adjusted trial balance for the Blueboy Cheese Corporation is presented below.

Account Title	Debits	Credits
Cash	21,000
Accounts receivable	300,000
Prepaid rent	10,000
Inventory	50,000
Office equipment	600,000
Accumulated depreciation—office equipment		250,000
Accounts payable		60,000
Note payable (due in six months)		60,000
Salaries payable		8,000
Interest payable		2,000
Common stock		400,000
Retained earnings		100,000
Sales revenue		800,000
Cost of goods sold	480,000
Salaries expense	120,000
Rent expense	30,000
Depreciation expense	60,000
Interest expense	4,000
Advertising expense	5,000
Totals	1,680,000	1,680,000

Required:

1. Prepare an income statement for the year ended December 31, 2018, and a classified balance sheet as of December 31, 2018.

2. Prepare the necessary closing entries at December 31, 2018.