Building Financial Statements Eastern Corporation began operations on January 1, 2019. The following information is available for Eastern Corporation on December 31, 2019: service revenue $17,000; accounts payable $2,000; common stock $10,000; equipment $16,000; supplies expense $200; dividends $600; accounts receivable $4,000; building rental expense $9,000; notes payable $5,000; retained earnings $???; insurance expense $1,000; supplies $1,800; and cash $1,400. Prepare an income statement, a retained earnings statement, and a balance sheet using this information.

1st- head up the statement name of company name of statement Eastern Corporation Income Statement For the Year Ended December 31, 2019 1st- head up the statement name of company name of statement period of time covered

Eastern Corporation Income Statement For the Year Ended December 31, 2019 Revenues Service revenue $17,000 2nd - List the revenues

3rd - List and total the expenses Eastern Corporation Income Statement For the Year Ended December 31, 2019 Revenues Service revenue $17,000 Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) 3rd - List and total the expenses

4th - Subtract expenses from revenues to obtain net income. Eastern Corporation Income Statement For the Year Ended December 31, 2019 Revenues Service revenue $17,000 Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) Net Income $ 6,800 4th - Subtract expenses from revenues to obtain net income.

1st- head up the statement name of company name of statement Eastern Corporation Retained Earnings Statement For the Year Ended December 31, 2019 1st- head up the statement name of company name of statement period of time covered

2nd - Start with beginning retained earnings Eastern Corporation Retained Earnings Statement For the Year Ended December 31, 2019 Retained earnings, January 1 $ 0 2nd - Start with beginning retained earnings

3rd - Add net income from the current year Eastern Corporation Retained Earnings Statement For the Year Ended December 31, 2019 Retained earnings, January 1 $ 0 Add: Net Income 6,800 3rd - Add net income from the current year

4th - Subtract current year’s dividends and total Eastern Corporation Retained Earnings Statement For the Year Ended December 31, 2019 Retained earnings, January 1 $ 0 Add: Net Income 6,800 Less: Dividends (600) Retained earnings, December 31 $ 6,200 4th - Subtract current year’s dividends and total

Eastern Corporation Balance Sheet December 31, 2019 1st - head up the statement name of company name of statement date

2nd - list the assets and total Eastern Corporation Balance Sheet December 31, 2019 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 2nd - list the assets and total

Liabilities and Stockholders’ Equity Eastern Corporation Balance Sheet December 31, 2019 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 3rd - list the liabilities and sub-total

Eastern Corporation Balance Sheet December 31, 2019 4th - list stockholders’ equity subtotal. Add to liabilities, Total If total assets and total liabilities & stockholders’ equity equal… double underline.

Liabilities and Stockholders’ Equity Eastern Corporation Balance Sheet December 31, 2019 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 Stockholders’ equity Common stock 10,000 Retained earnings 6,200 Total Stockholders’ equity 16,200 Total liabilities and stockholders’ equity $23,200

In what order are financial statements prepared? WHY?

Net Income is needed for the Statement of Retained Earnings. Eastern Corporation Income Statement For the Year Ended December 31, 2019 Revenues Service revenue $17,000 Expenses Rent expense $(9,000) Insurance expense (1,000) Supplies expense (200) Total expenses (10,200) Net Income $ 6,800 Net Income is needed for the Statement of Retained Earnings.

Ending Retained Earnings is needed for the balance sheet. Eastern Corporation Retained Earnings Statement For the Year Ended December 31, 2019 Retained earnings, January 1 $ 0 Add: Net Income 6,800 Less: Dividends (600) Retained earnings, December 31 $ 6,200 Ending Retained Earnings is needed for the balance sheet.

Liabilities and Stockholders’ Equity Eastern Corporation Balance Sheet December 31, 2019 Assets Cash $ 1,400 Accounts receivable 4,000 Supplies 1,800 Equipment 16,000 Total assets $23,200 Liabilities and Stockholders’ Equity Liabilities Notes payable $ 5,000 Accounts payable 2,000 Total liabilities 7,000 Stockholders’ equity Common stock 10,000 Retained earnings 6,200 Total Stockholders’ equity 16,200 Total liabilities and stockholders’ equity $23,200