Question

Use the following information to prepare a multi-step income statement and a balance sheet for Sherman Equipment Co. for Year 2. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.) (Balance Sheet only: Items to be deducted must be indicated with a minus sign.)

Salaries Expense	$	85,000			Operating Expenses	$	78,000
Common Stock		100,000			Cash Flow from Investing Activities		94,400
Notes Receivable (short term)		40,000			Prepaid Rent		14,100
Allowance for Doubtful Accounts		9,400			Land		56,000
Uncollectible Accounts Expense		9,700			Cash		49,700
Supplies		2,800			Inventory		99,900
Interest Revenue		7,000			Accounts Payable		62,000
Sales Revenue		384,000			Salaries Payable		28,000
Dividends		5,100			Cost of Goods Sold		164,000
Interest Receivable (short term)		3,100			Accounts Receivable		72,000
Beginning Retained Earnings		89,000

Answer 1

Calculation:

Retained Earning = Beginning Retained Earning + Net Income - Dividend

Ending Retained Earnings = $89,000 + $54,300 - $5,100

Ending Retained Earnings = $138,200