Question

Question 5

Monty Corp.’s balance sheet at December 31, 2016, is presented below.

MONTY CORP.
Balance Sheet
December 31, 2016
Cash
$33,500
Accounts payable
$13,800
Inventory
30,050
Interest payable
2,425
Prepaid insurance
5,600
Bonds payable
48,500
Equipment
39,000
Common stock
25,400

Retained earnings
$18,025
$108,150 $108,150

During 2017, the following transactions occurred. Monty uses a perpetual inventory system.

1. Monty paid $2,425 interest on the bonds on January 1, 2017.
2. Monty purchased $244,300 of inventory on account.
3. Monty sold for $486,000 cash inventory which cost $268,000. Monty also collected $29,160 sales taxes.
4. Monty paid $238,000 on accounts payable.
5. Monty paid $2,425 interest on the bonds on July 1, 2017.
6. The prepaid insurance ($5,600) expired on July 31.
7. On August 1, Monty paid $10,080 for insurance coverage from August 1, 2017, through July 31, 2018.
8. Monty paid $17,000 sales taxes to the state.
9. Paid other operating expenses, $88,000.
10. Redeemed the bonds on December 31, 2017, by paying $46,600 plus $2,425 interest.
11. Issued $87,000 of 8% bonds on December 31, 2017, at 103. The bonds pay interest every June 30 and December 31.

Adjustment data:

12. Recorded the insurance expired from item 7.
13. The equipment was acquired on December 31, 2016, and will be depreciated on a straight-line basis over 5 years with a $2,800 salvage value.
14. The income tax rate is 30%. (Hint: Prepare the income statement up to income before taxes and multiply by 30% to compute the amount.)

Prepare an income statement for the year ending December 31, 2017.

MONTY CORP.
Income Statement
choose the accounting period

For the Year Ending December 31, 2017
For the Month Ending December 31, 2017
December 31, 2017
select a name for section one

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
$enter a dollar amount
enter an income statement item
enter a dollar amount
select a summarizing line for the first part

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter a total amount for the first part
select an opening name for section two

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter an income statement item
$enter a dollar amount
enter an income statement item
enter a dollar amount
enter an income statement item
enter a dollar amount
select a closing name for section two

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter a total amount for section two
select a summarizing line for the second part

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter a total amount for the second part
select an opening name for section three

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter an income statement item
enter a dollar amount
enter an income statement item
enter a dollar amount
select a summarizing line for the third part

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
enter a total amount for the third part
enter an income statement item
enter a dollar amount
select a closing name for this statement

Dividends
Gross Profit
Income From Operations
Income Before Income Taxes
Net Income / (Loss)
Net Sales
Operating Expenses
Other Revenues and Expenses
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Sales Revenues
Total Operating Expenses
Total Revenues
$enter a total net income or loss amount

Prepare a retained earnings statement for the year ending December 31, 2017.

MONTY CORP.
Retained Earnings Statement
choose the accounting period

December 31, 2017
For the Year Ending December 31, 2017
For the Month Ending December 31, 2017
select an opening name

Dividends
Expenses
Net Income / (Loss)
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Revenues
Total Expenses
Total Revenues
$enter a dollar amount
select between addition and deduction

Add
Less
: select an item

Dividends
Expenses
Net Income / (Loss)
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Revenues
Total Expenses
Total Revenues
enter a dollar amount
select a closing name

Dividends
Expenses
Net Income / (Loss)
Retained Earnings, 1/1/17
Retained Earnings, 12/31/17
Revenues
Total Expenses
Total Revenues
$enter a total amount

Answer 1

	Account Heading		Debit	Credit
1	Interest Payable		2,425
	Cash			2,425
2	Inventory		244,300
	Accounts Payable			244,300
3	Cash		515,160
	Sales revenue			486,000
	Sales tax payable			29,160
	Cost of Goods sold		268,000
	Inventory			268,000
4	Accounts Payable		238,000
	Cash			238,000
5	Interest Expense		2,425
	Cash			2,425
6	Insurance expense		5,600
	Prepaid Insurance			5,600
7	Prepaid Insurance		10,080
	Cash			10,080
8	Sales tax Payable		17,000
	Cash			17,000
9	operating expenses		88,000
	Cash			88,000
10	Bonds Payable		48,500
	Interest Expense		2,425
	Cash			49,025
	Gain on Bond redemption			1,900
11	Cash		89,610
	Bonds Payable,8%			87,000
	Premium on Bonds Payable			2,610
	Adjustment entry
12	Insurance expense		5,880
	Prepaid Insurance			5,880
13	Depreciation expense		7,240
	Accumulated Depreciation			7,240
14	Income Tax expense		32,499
	Income Tax Payable			32,499
	MONTY CORP.
	Income Statement
	for the year ending December 31, 2017
	Sales Revenue		486,000
	Costs of goods sold		268,000
	Gross Profit		218,000
	Other Revenues and expenses
	Insurance expense	11480
	Depreciation expense	7240
	Other Operating expenses	88000
	Interest Expense	4850
	Total Operating Expenses		111570
	Gain on redemption of bond		1900
	Income before Income Taxes		108,330
	Income Taxes (30%)		32,499
	Net Income/( Loss)		75,831
	MONTY CORP.
	Balance Sheet
	as on December 31, 2017
	Cash	231,315
	Inventory	6,350
	Prepaid Insurance	4,200
	Total Current Assets		241,865
	Equipment	39,000
	Less: Accumulated Depreciation	(7,240)
	Total Fixed Assets		31,760
	Total Assets		273,625
	Liabilities
	Accounts Payable	20,100
	Income Tax Payable	32,499
	Sales tax Payable	12,160
	Total Current Liabilities		64,759
	Bonds payable, 8%	87,000
	Add: Premium on Bonds Payable	2,610	89,610
	Total Liabilties		154,369
	Common Stock		25,400
	Retained Earnings		93,856
	Total Shareholders equity		119,256
	Total Liabilities and Shareholders equity		273,625