Question

Capricorn Inc. is a private company reporting under ASPE. Its unadjusted trial balance at its fiscal year end, December 31, 2023 is shown below:

Capricorn Inc. Unadjusted Trial Balance December 31, 2023
	Debit	Credit
Cash	$38,000
Inventory	46,500
Supplies	5,000
Building	600,000
Accumulated depreciation – building		120,000
Equipment	330,000
Accumulated depreciation – equipment		$66,000
Accounts payable		34,000
Dividends payable		0
Interest payable		0
Income tax payable		0
Unearned revenue		30,600
Bonds payable (maturity date January 1, 2029)		500,000
Preferred shares ($4 noncumulative, 1,000 issued)		40,000
Common shares (120,000 issued)		60,000
Retained earnings		73,000
Cash dividends – preferred	0
Cash dividends – common	0
Sales		515,000
Cost of goods sold	159,000
Depreciation expense	20,000
Income tax expense	0
Insurance expense	8,200
Interest expense	1,800
Rent expense	32,600
Salaries expense	185,000
Supplies expense	12,500
TOTALS	$1,438,600	$1,438,600

No new shares were issued or reacquired during 2023.

The following transactions have not yet been recorded for 2023:
1. On December 31, 2023, the board of directors declared a total cash dividend of $54,000
2. The bonds were issued at par with a contract interest rate of 4%. Interest is paid semi-annually on July 1 and January 1.
3. The income tax rate for 2023 is 20%

Required:
Using a blank MS Excel workbook, answer the following questions:

1. Prepare the adjusting entries required for December 31, 2023 (
2. Prepare the closing entries for December 31, 2023
3. Prepare an income statement for the year ended December 31, 2023
4. Prepare a statement of retained earnings for the year ended December 31, 2023
5. Prepare a classified balance sheet at December 31, 2023
6. Calculate Capricorn’s earnings per share for 2023.

Answer 1

ANSWER 1 AMT. IN $ AMT. IN $

ADJUSTING ENTRIES AT 31ST DECEMBER DEBIT CREDIT

1 RETAINED EARNING A/C DR 54000

TO DIVIDEND PAYABLE 54000

( Being cash dividend declared by BOD)

2 INTEREST EXPENSES A/C DR 18200        INTEREST EXPENSES PAYABLE A/C 18200

( Being interest payable on 4% Bonds)

ANSWER 3 INCOME STATEMENT FOR THE YEAR 2023 AMT. IN $ AMT. IN $

SALES    515000

LESS COST OF GOODS SOLD 159000

GROSS PROFITS 356000

LESS INDIRECT EXPENSES

DEPRECIATION 20000

INSURANCE 8200

RENT 32600

INTEREST 20000

SALARIES 185000

SUPPLIES 12500 278300

NET PROFIT BEFORE TAX 77700

LESS INCOME TAX 15540

NET PROFIT AFTER TAX 62160

ANSWER 4 STATEMENT OF RETAINED EARNING AT 31 DECEMBER 2023

OPENING BALANCE IN RETAINED EARNING 73000

ADD NET PROFITS AFTER TAX 62160

LESS DIVIDEND DECLARED 54000

CLOSING BALANCE IN RETAINED EARNINGS 81160

ANSWER 5 BALANCE SHEET AT 31 DECEMBER 2023

ASSETS AMT IN $

CASH 38000

INVENTORY 46500

SUPPLIES 5000

BUILDING 600000

EQUIPMENT    330000

TOTAL 1019500

LIABILITIES

UNEARNED REVENUE 30600

DIVIDEND PAYABLE    54000

INTEREST PAYABLE    18200

INCOME TAX PAYABLE 15540

ACCOUNTS PAYABLE 34000

ACCUMULATED DEPRICIATION - BUILDING    120000

ACCUMULATED DERECIATION - EQUIPMENT 66000

BONDS PAYABLE 500000

$4 PREFERENCE SHARES 40000

COMMON SHARES 60000

RETAINED EARNINGS 81160

TOTAL 1019500

ANSWER 6 CALCULATION OF EPS FOR THE YEAR 2023 AMT IN $

NET PROFITS AFTER TAX 60160

LESS PREFERENCE SHARE DIVIDEND 4000

NET PROFITS AVAILABLE TO COMMON SHAREHOLDERS 54160

NUMBER OF COMMON SHARES 120000

EPS FOR 2023 0.45

  

  

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