Question

In: Accounting

The income statement for Delta-tec Inc. for the year ended December 31, 2016, was as follows

The income statement for Delta-tec Inc. for the year ended December 31, 2016, was as follows:

Delta-tec Inc.

Income Statement (selected items)

For the Year Ended December 31, 2016

 

1

Income from operations

$299,700.00

2

Gain on sale of investments

17,800.00

3

Less unrealized loss on trading investments

72,500.00

4

Net income

$245,000.00

 

The balance sheet dated December 31, 2015, showed a Retained Earnings balance of $825,000. During 2016, the company purchased trading investments for the first time at a cost of $346,000. In addition, trading investments with a cost of $66,000 were sold at a gain during 2016. The company paid $65,000 in dividends during 2016.
Required:
A. Determine the December 31, 2016, Retained Earnings balance.
B. Provide the December 31, 2016, balance sheet presentation for Trading Investments. 

Solutions

Expert Solution

a ) Determination of Retained Earnings on December 31, 2016.

Particulars Amount
Retained Earnings on December 31, 2015 825000
Add : Net income 245000
  1070000
Less : Dividends 65000
   
Retained earnings on 31 December 2016 1005000

 

b) Trading Investments are recorded in Current Assets.

Balance sheet presentation for Trading Investments ( At cost ) : Extract

   
Trading Investments (At cost ) 280000
Less: Valuation allowance for trading investments (Given) 72500
   
Trading Investments ( At Fair value ) 207500

 

Working Note :

1. Trading Investments (At cost ) = $3,46,000 - $66,000

                                                          = $2,80,000

A. Retained earnings on 31 December 2016 is $10,05,000.

Shaik sultan answered 4 years ago
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