Question

Prepare a retained earnings statement for the year ended December 31, 20Y8. Decreases in equity as negative amounts. • Refer to the Chart of Accounts for exact wording of account titles. • Refer to the Labels and Amount Descriptions for exact wording of text entries.

Score: 31/65

Equinox Products, Inc.

Retained Earnings Statement

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Income Statement data:
Advertising expense	$ 150,000
Cost of goods sold	3,700,000
Delivery expense	30,000
Depreciation expense-office buildings and equipment	30,000
Depreciation expense-store buildings and equipment	100,000
Income tax expense	140,500
Interest expense	21,000
Interest revenue	30,000
Miscellaneous administrative expense	7,500
Miscellaneous selling expense	14,000
Office rent expense	50,000
Office salaries expense	170,000
Office supplies expense	10,000
Sales	5,313,000
Sales commissions	185,000
Sales salaries expense	385,000
Store supplies expense	21,000

Retained earnings and balance sheet data:
Accounts payable	$ 194,300
Accounts receivable	545,000
Accumulated depreciation—office buildings and equipment	1,580,000
Accumulated depreciation—store buildings and equipment	4,126,000
Allowance for doubtful accounts	8,450
Bonds payable, 5%, due in 10 years	500,000
Cash	282,850
Common stock, $20 par
(400,000 shares authorized; 100,000 shares issued, 94,600 outstanding)	2,000,000
Dividends:
Cash dividends for common stock	155,120
Cash dividends for preferred stock	100,000
Goodwill	700,000
Income tax payable	44,000
Interest receivable	1,200
Inventory (December 31, 20Y8),
at lower of cost (FIFO) or market	778,000
Office buildings and equipment	4,320,000
Paid-in capital from sale of treasury stock	13,000
Excess of issue price over par:
-Common	886,800
-Preferred	150,000
Preferred 5% stock, $80 par
(30,000 shares authorized; 20,000 shares issued)	1,600,000
Premium on bonds payable	19,000
Prepaid expenses	27,400
Retained earnings, January 1, 20Y8	8,197,220
Store buildings and equipment	12,560,000
Treasury stock
(5,400 shares of common stock at cost of $33 per share)	178,200

Answer 1

Solution - For Preparing the Retained Earnings statement first we have prepare Income Statement to calculate the Net Income

Retained Earnings Statement

EQUINOX PRODUCTS INC.

RETAINED EARNINGS STATEMENTS

For the Year Ended December 31, 20Y8

Particulars			Amount
Retained Earnings January 1, 20Y8			$8197220
Net Income		$329000
Less : Dividends:
Common stock Dividend	$155120
Preferred Stock Dividend	$100000	$255120
Increase in Retained Earnings			$73880
Retained Earnings December 31, 20Y8			$8271100

Working Note 1 - Income statement

Particulars		Amount
Sales		$5313000
Less : Cost of Goods sold		($3700000)
Gross Profit		$1613000
Less : Expenses
Selling Expenses
Advertising Expenses	$150000
Delivery Expenses	$30000
Depreciation Expenses - Store Equipment	$100000
Sales Commission	$185000
Sales Salary	$385000
Sales Supplies	$21000
Miscellaneous Expenses	$14000	($885000)
Administrative Expenses office Supplies Expense Miscellaneous Administrative expenses	$10000 $7500
Depreciation expenses - Office Equipment	$30000
Office Rent Expenses	$50000
Office Salary expenses	$170000	($267500)
Add : Other Non Operating Interest Income		$30000
Net Income Before Income And Tax		$490500

Net Income :-

Income Before Interest and Taxes	$490500
Less : Interest	($21000)
Income Before tax	$469500
Income Tax expenses	($140500)
Net Income After tax	$329000