In: Accounting
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.
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