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East Company has the following ledger accounts and adjusted balances as of December 31, 2020. All...

East Company has the following ledger accounts and adjusted balances as of December 31, 2020. All accounts have normal balances. East’s income tax rate is 20%. East has 300,000 shares of $10 par Common Stock authorized and 85,000 shares of Common Stock outstanding.

         Accounts Payable…………………………….   87,750

         Accounts Receivable………………………… 707,100

         Accumulated Depreciation-Building………… 168,750

         Accumulated Depreciation-Equipment………. 140,000

         Administrative Expenses…………………….   150,000

         Allowance for Doubtful Accounts……………   67,500

         Bonds Payable……………………………….. 600,000

         Building……………………………………..1,687,500

         Cash…………………………………………. 97,750

         Common Stock……………………………...   900,000

         Cost of Goods Sold………………………….1,282,500

         Dividends……………………………………   75,000

         Equipment…………………………………… 652,500

         Income from Operations of Division Y…….. 135,000

         (Division Y is a component of East Company)

         Interest Revenue……………………………..   90,000

         Inventory……………………………………...945,000

         Land (held for future use)...…………………. 675,000

         Land (used for building)…………………….. 371,250

         Loss from Sale of Division Y……………….. 270,000

         (Division Y is a component of East Company)

         Loss on Sale of Land……...…………………. 33,750

         Mortgage Payable …………..………………. 813,550*

         Paid-In Capital in Excess of Par…………….. 594,000

         Premium on Bonds Payable……………...…    15,000

         Prepaid Insurance……………………………. 33,750**

         Retained Earnings, January 1, 2019………… 843,750

         Sales Discounts………………………………. 43,500

         Sales Returns and Allowances……………….112,500

         Sales Revenue……………………………...3,453,750

         Selling Expenses……………………………. 416,750

         Trademark……………………………………101,250

         Treasury Stock………………………………. 90,000

*$50,000 of the principal comes due in 2019.

**Two years insurance paid in advance.

Instructions:

Use this information to prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.

Solutions

Expert Solution

Income statement
For the year ended dec 31 2020
nEt sales
         Sales Revenue… 3453750
         Sales Discounts 43500
         Sales Returns and Allowances… 112500 3297750
Less: cost of good sold 1282500
Gross profit 2015250
operating expenses
         Selling Expenses 416750
         Administrative Expenses (150000+(33750/2*1)) 166875 583625
Income from operations 1431625
Other Income/(expenenses)
         Loss on Sale of Land… -33750
         Interest Revenue………… 90000 56250
Income from continuing operations 1375375
Income tax expenses 20%I 275075
Net Income from continuing operations 1100300
Discountinued operations
Income from Operations of Division net of taxes 108000
         Loss from Sale of Division Y net of tsxes -216000 -108000
Net Income 992300
Statement of Retained Earnings
Beginning bal 843750
Add: net income 992300
Less: dividend -75000
ending bal 1761050
Balance sheet
Assets
Current Assets
         Cash…… 97750
         Accounts Receivable 707100
         Allowance for Doubtful Accounts 67500 639600
         Inventory…………………………………… 945000
         Prepaid Insurance……… 16875
Total current assets 1699225
Investments
         Land (held for future use).. 675000
Property plant & equipment'
         Land (used for building) 371250
         Building……………… 1687500
         Accumulated Depreciation-Building 168750 1518750
         Equipment 652500
         Accumulated Depreciation-Equipmen 140000 512500
Total Property plant & equipment' 2402500
Intangibel assets
         Trademark…………… 101250
Total assets 4877975
Liabilities & stockholder equity
Current liabilities
Accounts Payable $87,750
         Mortgage Payable( current potion) 50000
Income tax payable 248075 275075+(135000*20%)-(270000*0.2)
Total Current liabilities $385,825
Long term liabilties
         Bonds Payable……… 600000
         Premium on Bonds Payable…… 15000 615000
         Mortgage Payable … 763550
Total liabilities $1,764,375
Stockholder equity
         Common Stock……………………………...   900,000 900000
         Paid-In Capital in Excess of Par…… 594000
         Retained Earnings, 1761050
Less: traesury stock -90000 3165050
Total Liabilities & stockholder equity $4,929,425

As there is differnec in the balances of dr and cr in question hence its also in BAlance sheet

ekkarill92 answered 1 year ago
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