51. The following data are available from the records of Jazz, Inc.: 15 points R
ID: 2591873 • Letter: 5
Question
51. The following data are available from the records of Jazz, Inc.: 15 points
Retained earnings, January 1, 2016 ...................
$115,000
Net sales ............................................
490,000
Interest expense .....................................
5,000
General and administrative expenses ..................
95,000
Cost of goods sold ...................................
220,000
Selling expenses .....................................
115,000
Dividend revenue .....................................
10,000
Dividends declared in 2016 ...........................
25,000
Dividends paid in 2016...............................
19,250
Income tax rate ......................................
30%
Common stock outstanding during the year .............
50,000 shares @ 1.00
Common stock authorized ..............................
100,000 shares
Prepare a single-step income statement for Jazz, Inc. for the year ended 12/31, 2016.
Jazz, Inc.
Income Statement
For the Year Ended December 31, 2016
Revenues:
Costs and expenses:
Income tax expense [.30 ´ (
Total costs and expenses ..............
Net income ................................
$
Earnings per common share ($)
$
52. What is the Retained earnings balance after the closing entries on December 31, 20156
Show the increase or decrease from the items in 2016 below.
Retained earnings, January 1, 2016 ...................
$115,000
Net sales ............................................
490,000
Interest expense .....................................
5,000
General and administrative expenses ..................
95,000
Cost of goods sold ...................................
220,000
Selling expenses .....................................
115,000
Dividend revenue .....................................
10,000
Dividends declared in 2016 ...........................
25,000
Dividends paid in 2016...............................
19,250
Income tax rate ......................................
30%
Common stock outstanding during the year .............
50,000 shares @ 1.00
Common stock authorized ..............................
100,000 shares
Explanation / Answer
Solution 51
Jazz, Inc.
Income Statement
For the Year Ended December 31, 2016
Particulars
Amount ($)
Amount ($)
Revenues:
Net sales
490,000
Dividend revenue
10,000
Total Revenues (A)
5,00,000
Costs and expenses:
Cost of goods sold
220,000
Interest expense
5,000
General and administrative expenses
95,000
Selling expenses
115,000
Total Costs and expenses (B)
435,000
Income Before Taxes (A-B)
65,000
Income Tax expenses
(19,500)
Net Income
45,500
*Earnings per common share
0.91
*Earnings per common share= Net Income / Number of common shares outstanding
= $ 45,500 / 50,000
=$ 0.91 per share
Solution 52
Retained earnings balance after the closing entries on December 31, 2016
Particulars
Amount ($)
Retained earnings January 1, 2016
115,000
Add: Net Income
45,500
Less: Dividend declared*
(25,000)
Retained earnings December 31, 2016
135,500
Increase or decrease from the items in 2016
= Retained earnings December 31, 2016 -Retained earnings January 1, 2016
= $ 135,500 - $ 115,000
= $ 20,500 (Increase)
There is an increase of $ 20,500 in retained earnings from January 1, 2016 ($ 115,000) to December 31, 2016 ($ 135,500).
Working Notes:
* Retained earnings are impacted at the time the dividends were declared, not at the time of payment.
Explanation: -
(a)Journal entry for dividend declaration
Retained earnings Debit $ 25,000
Dividend payable Credit $ 25,000
(a)Journal entry for dividend payment
Dividend payable Debit $ 19,250
Cash Credit $ 19,250
Note: Dividends are treated as a debit in the retained earnings account whether paid or not. For example, ABC board of directors declare a dividend of $60,000, and then it will deduct from the company's retained earnings even if the dividend has not yet been paid.
Particulars
Amount ($)
Amount ($)
Revenues:
Net sales
490,000
Dividend revenue
10,000
Total Revenues (A)
5,00,000
Costs and expenses:
Cost of goods sold
220,000
Interest expense
5,000
General and administrative expenses
95,000
Selling expenses
115,000
Total Costs and expenses (B)
435,000
Income Before Taxes (A-B)
65,000
Income Tax expenses
(19,500)
Net Income
45,500
*Earnings per common share
0.91
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