Question

I need to create a multi step income statement and statement of retained earnings with the following information ( assume a 30% tax rate and 500,000 shares of common stock)

Accounts Receivable                       $555,000

Accumulated Depr.-equipment          450,000

Accumulated Depr.-buildings            360,000

Allowance for doubtful accts.              36,000

Common Stock                           2,000,000

Depreciation Expense (equipment)      50,000

Depreciation Expense (buildings)         60,000

Dividends (common stock)               120,000

Dividends Payable                            30,000

Insurance Expense                             35,000

Interest Expense                               40,000

Interest Payable                                20,000

Notes Payable (1/1/25)                 1,000,000

Prepaid Insurance                              95,000

Purchases                                      975,000

Rent Receivable                               15,000

Rent Revenue                                  90,000

Retained Earnings (1/1/15)               818,000

Salaries Expense                             775,000

Salaries Payable                               25,000

Sales Returns                                   13,000

Sales Revenue                             2,975,000

there is additional information

1. bad debt expense for the current year not yet recorded 12,000

2.  An internal audit discovered that amortization expense of intangible assets was not recorded by the amount of $41,000 for this year

3.The company sold its only investment in held-to-maturity securities during the current year at a gain of $145,000. This gain is considered unusual in nature and infrequent in occurrence

4. At the beginning of the year, sold equipment for $50,000. The machine originally cost $76,000 and had accumulated depreciation of $32,000.

5. The company totally discontinued its mining operations during the year. The loss on operations of the discontinued subsidiary was $80,000 before taxes while there was a gain on disposal of mining assets of $120,000 before taxes.

6. a periodic inventory system and Inventory (1/1/15) is $175,000 and Inventory (12/31/15) is $225,000.

7. Unrealized (holding) gain on available-for-sale securities, net of tax, for 2015 is $32,000.

Please show work and explain calculations were possible

Answer 1

Income Statement for the year 2015

Particulars	Amount ($)	Amount ($)
Sales Revenue	2975000
Less: Sales Return	(13000)
Net Sales		2962000
Other Income-
Rent Revenue		90000
Gain From Sale of Investment		145000
Gain on disposal of mining		120000
Gain on sale of securities(Net)		32000
Profit on sale of equipment(76000-32000+50000)		6000
Total Income(I)		3355000
Less;- Expenses
Purchases	975000
Depreciation-
Equipment	50000
Building	60000
Amortisation of Intangible asset	41000
Insurance Expense	35000
Interest Expense	40000
Salaries Expense	775000
Change in inventory(Increase)- Closing Inventory less Opening Inventory (225000-175000)	50000
Loss on operations	80000
Bad Debts	12000
Allowance for doubtful accounts	36000
Total Expenses(II)		2154000
Profit before Tax(I-II)		1201000
Tax @30 %		360300
Profit for the year		840700

Statement of Retained Earnings

Particulars	Amount ($)
Retained Earnings as on 1/1/2015	818000
Add; Net profit earned in 2015	840700
Total	1658700
Less; Dividend	120000
Retained earnings 31/12/2015	1538700