Question

The Kimm Company had the following assets and liabilities on the dates indicated.
Kimm began business on January 1, 2013, with an investment of $600,000 (60,000 shares, par value = $10).

December 31	Total Assets	Total Liabilities
2013	$1,700,000	300,000
2014	1,900,000	100,000
2015	2,500,000	1,700,000

1. In 2013, Kimm paid $50,000 dividends and no additional investment was made. Other comprehensive income was $1,000
2. In 2014, Kimm paid $100,000 dividends, additional investment of $200,000 (20,000 shares, par value = $10) was made by shareholders on September 1, 2014. Other comprehensive income (loss) was $(2,000).
3. In 2015, Kimm had zero dividends and no additional investment was made. Other comprehensive income (loss) was $(500,000).

P1. Determine net income in 2013, 2014 and 2015. (Show work clearly)

P2. Determine basic earnings per share in 2013, 2014 and 2015. (Show work clearly)

P3. Determine comprehensive income in 2013, 2014 and 2015. (Show work clearly)

P4. Determine the balance of retained earnings at the end of 2015. (Show work clearly)

P5. Determine the balance of common stock at the end of 2015. (Show work clearly)

P6. Determine the balance of accumulated other comprehensive income at the end of 2015. (Show work clearly)

Hint : Use Equity = CS +RE+AOCI, along with A = L + E. No preferred stock (thus no preferred div, net income to common stockholders = net income)

Answer 1

P1	Net income for the years
	We know that Total Assets = Liabilities + Equity
	Implies, Equity = Total Assets - Liabilities
	Calculation of Equity	(Amounts in $)
	Particulars	31/12/2013	31/12/2014	31/12/2015
	Total Assets	1700000	1900000	2500000
	Liabilities	300000	100000	1700000
	Equity	1400000	1800000	800000
	We know that Equity = Common stock + Retained earnings + Accumulated other comprehensive income
	Equity = Common stock + (Opening Retained earnings + Net income - Dividends)+ Accumulated other comprehensive income
	Net income = Equity -Common stock - Opening retained earnings + Dividends - Accumulated other comprehensive income
	Calculation of Net income	(Amounts in $)
	Particulars	31/12/2013	31/12/2014	31/12/2015
	Equity	1400000	1800000	800000
	Common stock	600000	800000	800000
	Opening Retained earnings	0	799000	1001000
	Accumulated other comprehensive income	1000	-1000	-501000
	Dividends	50000	100000	0
	Net income	849000	302000	-500000
P2	Basic earnings per share
	Particulars	(Amounts in $)
		31/12/2013	31/12/2014	31/12/2015
	Net income	849000	302000	-501000
	Number of shares	60000	80000	80000
	Basic EPS (Net income / No. of shares)	14.15	3.775	-6.2625
P3	Comprehensive income
	Particulars	(Amounts in $)
		31/12/2013	31/12/2014	31/12/2015
	Net income	849000	302000	-501000
	Other comprehensive income	1000	-2000	-500000
	Comprehensive income	850000	300000	-1001000
P4	Balance of retained earnings as on 31/12/2015
	Particulars	Amount ($)
	Net income for the year 2013	849000
	Less: Dividends declared (2013)	50000
	Retained earnings for 2013	799000
	Add: Net income for 2014	302000
	Less: Dividends declared (2014)	100000
	Retained earnings for 2014	202000
	Add: Net income for 2015	-501000
	Less: Dividends declared (2015)	0
	Retained earnings for 2015	-501000
P5	Balance of common stock at the end of 2015
	Particulars	Amount ($)
	Common stock on 1 Jan 2013 (60000 shares @ 10 each)	600000
	Add: Issued stock on 1 September 2014 (20000 shares @ 10 each)	200000
	Common stock on 31 December 2015	800000
P6	Accumulated other comprehensive income at the end of 2015
	Particulars	Amount ($)
	Other comprehensive income for 2013	1000
	Add: Other comprehensive income for 2014	-2000
	Add: Other comprehensive income for 2015	-500000
	Accumulated other comprehensive income on 31/12/2015	-501000