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.
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