Question

RT Construction

RT Construction builds fine crafted robotics. Each robot sells for $125 and requires 4A, 2B, and 3C. During the period, RT bought 20A, 22B, and 40C on account for the same prices as listed in the beginning balance sheet. RT uses FIFO inventory costing. (All numbers are in $100s, except stock shares.) RT sold 12 robots.

Other Costs =    Building rent (paid in cash this period) $100 (1/2 sales, ½ production)

                         Labor (accrued) $50 each (1 corporate, 3 production)

Beginning Balance Sheet

Cash                                                                         $200

Accounts Receivable                                                100

Inventory        A 50 @ $10 each                               500

                        B 10 @ $5 each                                  50

                        C 3 @ $8 each                                    24

Machinery                                                       300

   Accumulated Depreciation                              100   200

Land                                                                         250

Total Assets                                                     $          ?

Accounts Payable                                                      $120

Bonds Payable                                                           300

Common Stock                                                          400

Retained Earnings                                                         ?

Total Liabilities and Stockholders’ Equity          $           ?

Other activities:

Sold ½ robots for cash and ½ on AR.

Sold land with cost $80 for $100 cash.

Machinery depreciation is $20.

Bad Debt Expense is 5% of ending AR (no beginning Allowance balance)

Bought patent by issuing $60 short-term note payable.

Accrued interest expense of $25 (not paid at yearend).

Tax rate is 20% (not paid at yearend). If there is a pretax loss, the tax rate results in a tax benefit.

There were 10,000 shares of common stock outstanding the full year.

Paid $110 dividend.

Develop a Multiple Step Income Statement, Statement of Owners’ Equity (RE and Common
Stock columns), and Balance Sheet. The time period is Q1, ending March 31, 2018.

Answer 1

WN
Sold 12 robots
Each Robots requires 4A , 2B , 3C
So, For 12 robots = 48A, 24B, 36C
Opening Balance = 50A, 10B, 3C
Purchased = 20A, 22B, 40C
Closing Inventory = 22A, 8B, 7C
Rate = A @$10, B @$5, C @$8 each.
So, Cost of Goods Sold = (48 x 10) + (24 x 5) + (36 x 8) = $888
Closing Inventory = (22 x 10) + (8 x 5) + (7 x 8) = 220 + 40 + 56 = $316
Purchase Value = (20 x 10) + (22 x 5) + (40 x 8) = 200 + 110 + 320 = 630

Multiple Step Income Statement

INCOME STATEMENT
Particulars	Notes	Amount	Amount
Sales Revenue
Sales ($125 x 12)			$        1,500.00
Less: Sales Return			-
Net Sales Revenue			$        1,500.00
Cost of Goods Sold	WN		$            888.00
GROSS PROFIT			$            612.00
Operating Expenses
Building Rent		$            100.00
Labor
Production (3 x $50)		$            150.00
Corporate		$              50.00
Depreciation		$              20.00
Bad Debt Exp	See Balancesheet	$              42.50	$            362.50
OPERATING PROFIT (EBIT)			$            249.50
Non Operating Expenses
Gain on Sale of land (100 -80)		$            (20.00)
interest expense		$              25.00
			$                5.00
EARNING BEFORE TAX (EBT)			$            244.50
Income Tax@20%			$              48.90
NET INCOME			$            195.60

Statement of Owners’ Equity

Particulars	Share Capital	Retained Earnings
Balance at Beginning	$              400.00	$                        504.00
Issue of share capital
Income for the year		$                        195.60
Dividends		$                      (110.00)
Purchase of own shares
Revaluation gain
Balance at Closing	$              400.00	$                        589.60

Balance Sheet

Particulars	Beginning	Closing	Adj with op balance
ASSETS
Current Assets
Cash and Cash Equivalents	$            200.00	$            840.00	750 -100+100-110
Accounts Receivable	$            100.00	$            850.00	750+
Bad Debt Exp Allowance @5%		$              42.50
Net		$            807.50
Inventory
A	$            500.00	$            220.00
B	$              50.00	$              40.00
C	$              24.00	$              56.00
Short-Term Investments
Prepaid Expenses
Non-Current Assets
Machinery	$            300.00	$            300.00
Accumulated Depreciation	$         (100.00)	$            120.00	20+
Net	$            200.00	$            180.00
Land	$            250.00	$            170.00	80-
Long-Term Investments
Patents		$              60.00
Investments
TOTAL ASSETS	$        1,324.00	$        2,373.50
LIABILITIES & EQUITY
LIABILITIES
Current Liabilities
Accounts Payable	$            120.00	$            975.00	630+200+25
Notes Payable – Current		$              60.00	(Bought Patent)
Unearned Revenue (Advances)
Income Tax Payable		$              48.90	(See income Statement)
Long Term Liabilities
Bonds Payable	$            300.00	$            300.00
Other Long-Term Liabilities
TOTAL LIABILITIES	$            420.00	$        1,383.90
EQUITY
Preferred Stock	$            400.00	$            400.00
Common Stock
Treasury Stock
Additional Paid-up Capital (Premium)
Retained Earnings	$            504.00	$            589.60	see Statement of equity
TOTAL EQUITY	$            904.00	$            989.60
TOTAL LIABILITIES & EQUITY	$        1,324.00	$        2,373.50