Required a. Prepare an Income statement b. Determine the amount of retained earn

Question

Required

a.  

Prepare an Income statement

b.  

Determine the amount of retained earnings at the end of 2016.

c.  

Prepare a classified statement of financial position as at December 31, 2016.

Little Lads and Ladies Ltd. sells children's clothing. At the end of December 2016, it had the following adjusted account balances, which are listed in random order: Cash Wages Payable Supplies Expense Equipment Wages Expense Prepaid Expenses Cost of Goods Sold Sales Revenue Accounts Receivable Rent Expense Bank Loan Payable Advertising Expense Accounts Payable S 3,000 S 600 1,200 500 20,000 200 300 1,500 17,600 8,000 400 800 300 Utilities Expense 500 Dividends Declared 4,200 Depreciation Expense 23,000 Common Shares 25,000 Telephone Expense 400 32,000 66,450 10,00 Interest Expense Accumulated Depreciation, Equipment Retained Earnings 0Inventory 4,800 Repairs and Maintenance Expenses 3,800 Supplies 750 Interest Payable 5,000

Explanation / Answer

(a).

Income Statement

Sales revenue

$66450

Less:

Cost of goods sold

($32000)

Gross profit

$34450

Less: Expenses

Supplies expense

$4200

Wages expense

$25000

Rent expense

$4800

Advertising expense

$750

Utilities expense

$600

Depreciation expense

$500

Telephone expense

$200

Interest expense

$300

Repairs & Maintenance expense

$400

($36750)

Net loss

($2300)

  

(b).

Statement of Retained Earnings

Beginning retained earnings

$17600

Net loss

($2300)

Dividends declared

($1200)

Ending retained earnings

$14100

  

(c).

Balance Sheet

ASSETS

Current Assets;

Cash

$3000

Prepaid expense

$400

Accounts receivable

$10000

Inventory

$8000

Supplies

$800

Total Current Assets

$22200

Non-current Assets;

Equipment…………………………….$23000

Less: Accumulated depreciation……($1500)

$21500

Total Non-current Assets

$21500

Total Assets

$43700

LIABILITIES

Current Liabilities;

Wages payable

$500

Accounts payable

$5000

Interest payable

$300

Total Current Liabilities

$5800

Non-current Liabilities;

Bank loan payable

$3800

Total Non-Current Liabilities

$3800

Shareholders’ Funds;

Common shares

$20000

Retained earnings

$14100

Total Shareholders’ Funds

$34100

Total Liabilities & Shareholders’ Funds

$43700

  

Income Statement

Sales revenue

$66450

Less:

Cost of goods sold

($32000)

Gross profit

$34450

Less: Expenses

Supplies expense

$4200

Wages expense

$25000

Rent expense

$4800

Advertising expense

$750

Utilities expense

$600

Depreciation expense

$500

Telephone expense

$200

Interest expense

$300

Repairs & Maintenance expense

$400

($36750)

Net loss

($2300)

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