On December 31, 2020, Information Inc. completed its third year of operations. A

Question

On December 31, 2020, Information Inc. completed its third year of operations. Abdul Mukhtar is a student working part-time in the company's business office while taking his first accounting course. Abdul assembled the following list of account balances, which are not arranged in any particular order: $76,000 20,000 140,000 12,000 6,000 6,300 177,000 200,000 5,200 72,700 125,000 3,700 Accounts Receivable $150,000 Advertising Expense 2,000 Cash Interest Expense Notes Receivable Cost of Goods Sold 26,000 Inventory 590,000 Dividends Declared 570,000 Unearned Revenue 360,000 Insurance Expense Common Shares Buildings Accumulated Depreciation, Equipment Land 20,000 160,000 Equipment 40,000 Miscellaneous Expense Retained Earnings (as at January 1, 2020) Accumulated Depreciation, Buildings Sales Revenue 963,000 Accounts Payable Utilities Expense Notes Payable 2,500 Wages Expense 30,000 Supplies These account amounts are correct, but Abdul did not consider the following information: 1. The amount shown as insurance expense includes $900 for coverage during the first two months of 2021. 2. The note receivable is a six-month note that has been outstanding for four months. The interest rate is 9% per year. The interest will be received by the company when the note becomes due at the end of February 2021 3. As at December 31, 2020, the supplies still on hand had a cost of $500 4. On November 1, 2020, the company rented surplus space in one of its building to a tenant for $1,000 per month. The tenant paid for six months in advance 5. Depreciation for 2020 is $17,000 on the buildings and $22,000 on the equipment. 6. Employees earned $2,800 of wages in December 2020 that will not be paid until the first scheduled payday in 2021 7. Additional dividends of $47,000 were declared in December 2020, but will not be paid until January 2021.

Explanation / Answer

Statement of Income For the year ended December 31,2020 Revenues: Sales revenue 963000 Interest revenue 780 Rent revenue 2000 Total revenues 965780 Expenses: Advertising expense 76000 Insurance expense 5400 Interest expense 2000 Miscellaneous expense 5200 Utilities expense 2500 Wages expense 127800 Cost of goods sold 590000 Supplies expense 3200 Depreciation expense 39000 Total expenses 851100 Net income/(loss) 114680

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