Problem 2-7A:

Preparing an income statement, statement of retained earnings, and balance sheet

Angela Lopez owns and manages a consulting firm called Metrix, which began operations on December 1. On December 31, Metrix shows the following selected accounts and amounts for the month of December.

Cash $8,000 Accounts payable $ 1,300 Rental revenue $ 500

Accounts receivable 3,500 Notes payable 2,400 Salaries expense 3,000

Notes receivable 2,500 Unearned revenue 300 Rent expense 2,000

Office supplies 1,500 Common stock. 11,600 Advertising expense 400

Prepaid insurance 1,000 Dividends 2,000 Utilities expense 200

Equipment 4,000 Consulting revenue 12,000

Required

1. Prepare a December income statement for the business.

2. Prepare a December statement of retained earnings. The Retained Earnings account balance at December 1 was $0.

3. Prepare a December 31 balance sheet. Hint: Use the Retained Earnings account balance calculated in part 2