M3-21

Income Statement
Service Revenue $35,700
Salaries and Wages Expense (3,900)
Repairs and Maintenance Expense (410)
Office Expenses (270)
Net Income $31,120
Statement of Retained Earnings
Retained Earnings, Jan. 1 $14,500
Add: Net Income 31,120
Subtract: Dividends (0)
Retained Earnings, Dec. 31 $45,620
Balance Sheet
Assets
Current Assets
Cash $ 59,750
Accounts Receivable 3,300
Prepaid Insurance 4,700
Equipment 64,600
Land 23,000
Total Assets $ 155,350
Liabilities
Current Liabilities
Accounts Payable $ 29,230
Deferred Revenue 1,500
Notes Payable (long-term) 74,000
Total Liabilities 104,730
Stockholders’ Equity
Common Stock 5,000
Retained Earnings 45,620
Total Stockholders’ Equity 50,620
Total Liabilities and Stockholders’ Equity $ 155,350

Equilibrium Riding, Inc.

Statement of Retained Earnings
At December 31
Retained Earnings, Jan. 1 $14,500
Add: Net Income 31,120
Subtract: Dividends (0)

Retained Earnings, Dec. 31 $45,620

 Equilibrium Riding, Inc.
Balance Sheet
At December 31
Assets
Current Assets
Cash $ 59,750
Accounts Receivable 3,300
Prepaid Insurance 4,700
Equipment 64,600
Land 23,000

Total Assets $ 155,350

Liabilities
Current Liabilities
Accounts Payable $ 29,230
Deferred Revenue 1,500
Notes Payable (long-term) 74,000

Total Liabilities 104,730

Stockholders’ Equity
Common Stock 5,000
Retained Earnings 45,620
Total Stockholders’ Equity 50,620

Total Liabilities and Stockholders’ Equity $ 155,350

 EQUILIBRIUM RIDING INC
Income Statement
For the Month Ended December 31, 20XX

Service Revenues $35,700

Less: expenses
Salaries and wages expense $3,900
Repairs expense $410
Office expense $270
Total expenses $4,580
Net profit $31,120

Net Income
Net Profit Margin = Revenue x 100
31,120
= x 100
35,700
= 0.8717 x 100
= 87.17%

It means that in every dollar Equilibrium Riding earns through sales they generate $0.87 as
profit.