Question

In: Accounting

Bill-Ross Corporation is a private corporation using ASPE. At July 31, 2019, an analysis of the...

Bill-Ross Corporation is a private corporation using ASPE. At July 31, 2019, an analysis of the accounts and discussions with company officials included the following account balances and other information:

Supplies inventory

40,000

Purchase discounts

9,000

Accounts payable

30,000

Dividends declared and paid

16,000

Loss from fire (net of $4,000 tax)

12,000

Accounts receivable

$102,000

Selling expenses

46,000

Common shares (20,000 issued; no change during 2017)

200,000

Accumulated depreciation

90,000

Long term note payable (due Oct 1, 2021)

100,000

Inventory, Jan 1, 2017

72,000

Dividend revenue

10,000

Inventory, Dec 31, 2017

65,000

Unearned service revenue

3,000

Land

370,000

Accrued interest payable

1,000

Cash

60,000

Franchise

100,000

Sales

625,000

Retained earnings, Jan 1, 2017

155,000

Interest expense

8,500

Cumulative effect of change from straight-line to accelerated

depreciation (net of $2,000 tax)

-6,500

General and administrative expenses

75,000

Purchases

335,000

Allowance for doubtful accounts

5,000

Machinery and equipment

225,000

Unless indicated otherwise, you may assume a 25% income tax rate. General and administrative expenses include depreciation. There are no preferred shares issued.

Instructions

a.     Prepare a multiple-step income statement

b.    Prepare a retained earnings statement

Solutions

Expert Solution

Answer:

A.) Income statement

BILL-ROSE CORPORATION
Income statement
For the year ended December 31, 2019
Particulars Amount Amount
Sales $                      6,25,000
Cost Of goods Sold:
   Merchandise Inventory, Jan 1 $                 72,000
        Purchases $              3,35,000
        Less: Purchase discounts $                  -9,000
   Net Purchases $              3,26,000
   Merchandise avilable for sale $              3,98,000
   Less: Merchandise Inventory, Dec 31 $                -65,000
Cost of Goods Sold $                      3,33,000
Gross profit on Sales $                      2,92,000
Operating Expenses:
Selling Expenses $                 46,000
General and administrative expenses $                 75,000
Total Operating expenses $                      1,21,000
Income from operations $                      1,71,000
Other revenues and gains:
   Dividend Revenue $                         10,000
Other expenses and losses:
   Interest Expenses $                  -8,500
   loss from Fire ($12,000 + $4,000) $                -16,000 $                        -24,500
Income before Income tax $                      1,56,500
Income Tax ($156,500 × 25%) $                        -39,125
Net Income for the year $                      1,17,375
Earnings per share ($117,375 ÷ 20000) 5.87

.

.

B.) Retained Earnings statement

BILL-ROSE CORPORATION
Retained Earnings statement
For the year ended December 31, 2019
Particulars Amount Amount
Retained earnings, January 1, as reported 155000
Cumulative effect of change from straight line to accelerated Depreciation Method -6500
Retained earnings, January 1, as adjusted 148500
Add: Net Income ( As per income statement) 117375
Less; Dividend Declared and paid ` -16000
Retained earnings, December 31, 2020 101375

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