P2 56B (Learning Objective 1: Analyzing a trial balance) Your best friend is considering making an investment in Photometric Tailoring Co. She seeks your advice in interpreting the company’s information. Specifically, she asks whether this trial balance provides the data to prepare a balance sheet and an income statement.
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Photometric Tailoring Co. Trial Balance December 31, 20X9 |
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Cash |
$ 12,000 |
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Accounts receivable |
47,000 |
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Prepaid expenses |
4,000 |
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Equipment |
236,000 |
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Accounts payable |
$105,000 |
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Note payable |
92,000 |
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Common stock |
30,000 |
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Retained earnings |
32,000 |
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Service revenue |
139,000 |
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Salary expense |
63,000 |
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Rent expense |
26,000 |
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Supplies expense |
7,000 |
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Advertising expense |
3,000 |
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Total |
$398,000 |
$398,000 |
Required
Write a memo to answer your friend’s questions. State which accounts go on the balance sheet and which accounts go on the income statement. In your memo, state the amount of net income that Photometric Tailoring earned in 20X9, and explain your computation.