Practice problems:

Q-1 Prepare the Income Statement from the following information:

Service revenue 19,000

Depreciation expense 700
Wages expense 600
Rent expense 2,000
Supplies expense 1,200
Utilities expense 500
Repairs expense 600
Telephone expense 750

Solution:

Income Statement
For Year Ended December 31, 2020
Revenue: the revenue for the period is$19000

Expenses: $700( depreciation)

$600(wages)
$2000(rent)
$1200(supplies)
$500(utilities)
$600(repairs)
$750(telephone)
Total $700+$600+$2000+$1200+$500+$600+$750 =$6350
expense
Profit = total revenue-total expenses
($19000-$6350)=$12650
Hence profit =$12650
Q-2 Prepare statement of changes in equity from the following information:

Capital at the beginning of the year = 100,000

Capital introduced during the year = 50,000

Profit made during the year = 10,000

Withdrawals made by the owner = 5,000

Solution:

Statement of Changes in Equity

For Year Ended December 31, 2020
Capital, Jan 1 100,000
Add: 60,000
Introduced during the year 50,000
Profit 10,000
Total 160,000
Less: Withdrawals by owner 5,000
Capital, Dec 31 155,000