Question

Carr Company has the following ledger accounts and adjusted balances as of December 31, 2019. All accounts have normal balances. Carr’s income tax rate is 20%. Carr has 300,000 shares of Common Stock authorized, 100,000 shares of Common Stock issued, and 95,000 shares of Common Stock outstanding.

Accounts Payable……………………………. 58,500

Accounts Receivable………………………… 405,000

Accumulated Depreciation-Building………… 112,500

Accumulated Depreciation-Equipment………. 90,000

Administrative Expenses……………………. 90,000

Allowance for Doubtful Accounts…………… 45,000

Bonds Payable……………………………….. 400,000

Building……………………………………..1,125,000

Cash…………………………………………. 58,500

Common Stock……………………………… 600,000

Cost of Goods Sold…………………………. 855,000

Discount on Bonds Payable………………… 10,000

Dividends…………………………………… 30,000

Equipment…………………………………… 435,000

Income from Operations of Division X…….. 90,000 (Division X is a component of Carr Company)

Interest Revenue…………………………….. 60,000

Inventory……………………………………...630,000

Land (held for future use)...…………………. 450,000

Land (used for building)…………………….. 247,500

Loss from Sale of Division X...........................180,000 (Division X is a component of Carr Company)

Loss on Sale of Investments.……………….. .. 22,500

Mortgage Payable …………..………………. 562,500*

Paid-In Capital in Excess of Par……………...396,000

Prepaid Rent…………………………………. 22,500**

Retained Earnings, January 1, 2019………… 562,500

Sales Discounts………………………………. 45,000

Sales Returns and Allowances……………….. 75,000

Sales Revenue……………………………...2,302,500

Selling Expenses……………………………. 292,500

Trademark…………………………………… 67,500

Treasury Stock………………………………. 60,000

*$40,000 of the principal comes due in 2019.

**Two years rent on offsite document storage paid in advance.  

Instructions: Use this information to prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.

Answer 1

Answer :

Carr Company Income statement Year ending Dec 31.2019
Sales Revenue	2,302,500
Less Sales discount	45,000
Sales return and Allowances	75,000
Net sales return revenue		2,182,500
Cost of goods sold		855,000
Gross profit		1,327,500
Operating expenses
Selling expenses	292,500
Administrative expenses	90,000
Total operating expenses		382,500
Operating income		945,000
Other income (Expense)
Interest revenue	60,000
Loss on sale of investment	(22,500)
Total other income (Expenses)		37,500
Income before tax		982,500
Less tax expense		196,500
Income from operations of Division X net of tax	72,000
Less : Loss from sale of Division X (net of tax)	(144,000)	(72,000)
Net income		714,000

Carry company Statement of Retained Earnings For the year ending Dec.31.2019
Beginning balance of retained earnings		562,500
Add Net income	714,000
Less ; Dividend	(30,000)	684,000
Ending balance of Retained earnings		1,246,500

Carr Company Classified Balance sheet As on Dec.31.2019
Asset
Current Assets
Cash	58,500
Accounts Receivable	405,000
Less : Allowance for doubtful debts	(45,000)
Inventory	630,000
Total Current Assets		1,071,000
Long term investments
Land held for future use	450,000
Total long term investments		450,000
Property, plant and equipment
Land in use (used for building)	247,500
Buildings	1,125,000
Accumulated depreciation - building	(112,500)
Equipment	435,000
Less : Accumulated depreciation - Equipment	(90,000)
Total property plant and equipment		1,605,000
Intangible Assets
Trade marks	67,500
Total intangible Assets		67,500
Total Assets		3,193,500
Liabilities and shareholder's Equity
Current Liabilities
Accounts payable	58,500
Income tax payable	-
Current portion of Mortgage payable	40,000
Total current liabilities		98,500
Long term liabilities
Mortgage payable	522,500
Bonds payable	400,000
Less : Discount on bonds payable	(10,000)	912,500
total long term liabilities		1,01,000
Stockholder's equity
Plant in capital
Common stock	600,000
Additional paid in capital
Paid in capital in excess of par - common stock	396,000
Total paid in capital	996,000
Retained earnings	1,246,500
Total paid in capital and Retained earnings	2,242,500
Less Treasury stock	(60,000)
Total shareholder's Equity		2,182,500
Total liability and shareholder's Equity		3,193,500