Balance Sheet & Income Statement

Eastern Ltd., which has just started trading on 1 January 2019, has the following account balances prior to the recording of the final month of the year:

Account Balances as at 30 November 2019

Account $

Cash $10 000

Accounts receivable $7 200

Stock of Supplies $6 500

Property, Plant & Equipment - cost $25 000

Accounts payable $4 500

Bank Loan $10 000

Contributed capital (25 700 shares) $25 700

Sales revenue $58 000

Operating expenses (excluding depreciation) $23 100

Other operating income $6 500

Cost of goods sold $32 000

Interest expense $900

In December 2019, the following transactions took place:

1. Credit purchases of goods $8,000.
2. Credit sales $22,000 (cost of goods sold $12,000).
3. Paid wages for December $1,500.
4. Received $17,000 from debtors.
5. At the end of December, sold off an equipment that has costed $10,000 at the price of $6,000. The yearly depreciation expense of this equipment was $2,000.
6. Paid an amount of rent.
7. Bank loan repayment of $1,000.

Additional information as below:

1. Operating expenses above include rent and wages but exclude depreciation. Annual rental expense is $7200. As at 31 December 2019, there is an accrued rental expense of $200. The interest rate of the bank loan of $10,000 is 10% per annum. The bank loan was acquired on 1 January 2019.

2. Annual depreciation expense for the property, plant & equipment before the disposal of the equipment at transaction 7 was $5,000.

Required:

1. Record the Account balances prior to adjustments in the workbook. Then, calculate and record the Adjustments in the workbook, total and balance the workbook. Indicate the transaction and additional information number accordingly in the workbook. [3 marks]

2. Prepare a properly formatted Balance Sheet as at 31 December 2019 and Income Statement for the year ended 31 December 2019. [2 marks]