Chapter 4, Problem 4.36BP

1.

To determine

Balance Sheet: A Balance Sheet is a statement showing the position of the assets, liabilities and the owner’s equity at the end of the financial year.

Income Statement: Income Statement is a financial statement that is prepared by all the companies by enumerating all the expenses and revenues to calculate the resulting difference of Net Profit or Net Loss.

Retained Earnings Statement: Retained Earnings Statement is the statement showing the balance of retained earnings left at the end of the period after including the net profit for the period and distributing the dividend to the shareholders.

Closing entries: Closing entries are recorded in order to close the temporary accounts such as incomes and expenses by transferring them to the permanent accounts such as retained earnings. It is passed at the end of the accounting period, to transfer the final balance.

Current Ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1

Formula:

$\text{Current ratio}=\frac{\text{Current assets}}{\text{Current}\text{liabilities}}$

To prepare: Company’s income statement for the year ended December 31, 2018.

2.

To determine

To prepare: Company’s statement of retained earnings for the year ended December 31, 2018.

3.

To determine

To prepare: Company’s classified balance sheet at December 31, 2018.

4.

To determine

To Prepare: The closing entries for BI System at December 31, 2018.

5.

To determine

To calculate: The Company’s current ratio at December 31, 2018.