Q2P - Intermediate Accounting (Kieso)

Question

(Single-Step Statement, Retained Earnings Statement, Periodic Inventory) Presented below is the trial balance of Thompson Corporation on December 31, 2017.

THOMPSON CORPORATION
TRIAL BALANCE
DECEMBER 31, 2017
	Debit (\()	Credit (\))
Purchase Discounts		\(10,000
Cash	\)189,700
Accounts receivables	105,000
Rent Revenue		18,000
Retained Earnings		160,000
Salaries and Wages payable		18,000
Sales Revenue		1,100,000
Notes Receivables	110,000
Accounts payable		49,000
Accumulated Depreciation		28,000
Sales discount	14,500
Sales return and allowances	17,500
Notes payable		70,000
Selling expenses	232,000
Administrative expenses	99,000
Common Stock		300,000
Income tax expenses	53,900
Cash Dividends	45,000
Allowance for Doubtful Accounts		5,000
Supplies	14,000
Freight-In	20,000
Land	70,000
Equipment	140,000
Bonds Payable		100,000
Gain on Sale of Land		30,000
Accumulated Depreciation		19,600
Inventory	89,000
Buildings	98,000
Purchases	610,000
Totals	\(1,907,600	\)1,907,600

A physical count of inventory on December 31 resulted in an inventory amount of \(64,000; thus, cost of goods sold for 2017 is \)645,000. 

Instructions

Prepare a single-step income statement and a retained earnings statement. Assume that the only changes in retained earnings during the current year were from net income and dividends. Thirty thousand shares of common stock were outstanding the entire year.

Step-by-Step Solution

Answer

The ending balance of retained earnings as on December 31, 2017, is $201,100.

Step 1: Meaning of Sales Revenue

Sales Revenue refers to the amount of money generated by the sale of goods, products, and services. Sales are considered the primary source of revenue generation for business entities. 

Step 2: Preparation ofsingle-step income statement

Single Step Income Statement
For the year ended December 31, 2017
Sales revenue	1,100,000
Less: Sales Discounts	14,500
Less: Sales Returns and Allowances	17,500
Net Sales Revenue		10,68,000
Rent Revenue		18,000
Gain on Sale of Land		30,000
Total Revenues and Gains		$11,16,000
Expenses
Cost of Goods sold	645,000
Administrative Expenses	99,000
Selling expenses	232,000
Total Expenses		976,000
Income before taxes		140,000
Less: Income tax expenses		53,900
Net income		86,100
Number of outstanding shares		30,000
Earnings per share		$2.87

Step 3: Preparation ofretained earnings statement as on December 31, 2017

Particulars	Amount ($)
Beginning Balance of Retained Earnings	$160,000
Add: Net Income	86,100
	246,100
Less: Dividends	45,000
Ending balance of Retained Earnings	201,100