Question

Maki and Leduc Inc. has recorded all necessary adjusting entries, except for income tax expense, at its fiscal year end August 31, 2021. The following information has been taken from the adjusted trial balance:

Cash

119,000

Inventory

122,000

Sales

960,000

Interest Expense

35,000

Notes Payable

126,000

Unearned Revenue

33,000

Retained Earnings (September 1, 2020)

6,325

Salaries Expense

110,000

Supplies Expense

25,000

Accounts Payable

45,000

Income tax Payable

6,175

Common shares

91,000

Accounts receivable

122,000

Cost of goods sold

722,000

Insurance expenses

​

12,500________

​

$ 1,267,500

$ 1,267,500

Maki and Leduc Inc. has a 15% tax rate.

Instructions

a)	Prepare a multi-step income statement and the required journal entry to adjust income tax

expense.

b)	Prepare a statement of retained earnings.

c)	Prepare closing entries.

Answer 1

a.

Maki and Leduc Inc.
Income Statement
For the Year Ended August 31, 2021
Revenues
Sales revenue		960,000
Cost of goods sold		-722,000
Gross profit		238,000
Operating expenses:
Salaries expense	110,000
Supplies expense	25,000
Insurance expense	12,500
Total Operating expenses		-147,500
Income from operations		90,500
Other expenses:
Interest expense		-35,000
Income before income tax		55,500
Income tax expense (55,500 x 15%)		-8,325
Net Income		$47,175

Date	General Journal	Debit	Credit
Aug-31	Income tax expense	$8,325
	Income tax payable		$8,325
	( To record income tax expense)

b.

Statement of Retained Earnings
Beginning retained earnings	6,325
Net Income	47,175
	$53,500
Dividends	0
Retained earnings, Ending	$53,500

c.

Date	General Journal	Debit	Credit
Aug-31	Sales revenue	$960,000
	Income Summary		$960,000
	( To close revenues)
Aug-31	Income Summary	$912,825
	Cost of goods sold		$722,000
	Salaries expense		$110,000
	Supplies expense		$25,000
	Insurance expense		$12,500
	Interest expense		$35,000
	Income tax expense		$8,325
	( To close expenses)
Aug-31	Income Summary	$47,175
	Retained earnings		$47,175
	( To close income summary)

Kindly comment if you need further assistance.

Thanks‼!