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Case 1: Stone Plumbing Services

The Income Statement and Balance Sheet for the year ended December 31, 2017 are shown below.

Stone Plumbing Income Statement For the year ended December 31, 2017
Service revenue				$60,000
Expenses:
Salaries				30,000
Utilities				5,000
Supplies				3,000
Depreciation				8,000
Total expenses				46,000
Net income				$ 14,000

Stone Plumbing Balance Sheet December 31, 2017
Assets				Liabilities
Current assets:				Current liabilities:
Cash		$4,500		Accounts payable	$ 6,000
Accounts receivable		9,500		Utilities Payable	7,000
Supplies		3,500		Total current liabilities	13,000
Total current assets		17,500
				Stockholders Equity
Long-term assets:				Common stock	23,000
Equipment		36,000		Retained earnings	9,500	*
Accumulated depr.		(8,000)		Total stockholders equity	32,500
Total assets		$45,500		Total liabilities and stockholders equity	$45,500

The following is a summary of the transactions for the year 2018:

January 24: Provide plumbing services for cash, $20,000, and on account, $65,000

March 13: Collect on accounts receivable, $53,000

May 6: Issue shares of common stock in exchange for $11,000 cash.

June 30: Pay salaries for the current year, $33,000

Sept 15: Pay for utilities, $13,000, of which $7,000 represents costs from 2017

Nov 24: Receive cash in advance from customers, $10,000

Dec 30: Pay $3,000 cash dividends to stockholders.

Additional information:

The equipment is depreciated at the rate of $8,000 annually

Supplies on hand at year end amount to $1,100

Of the $10,000 received in advance from customers, $7,000 of the work has been completed by year end.

Requirements:

Journalize and post all transactions for 2018, including any necessary adjusting entries.

Prepare trial balances at the appropriate points in the accounting cycle

Prepare an Income Statement and Balance Sheet for the year ended December 31, 2018.

Complete the accounting cycle to close out the year.

Evaluate Stones financial statements for 2017 and 2018, commenting on liquidity, solvency, and profitability. Have these assessments improved or declined over the year? Support your comments with calculations, as well as descriptions of what these ratios and formulas tell us.

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