Q43PGB - Horngren'S Financial And Managerial Accounting

Question

The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:

ROCKIN ROBBIN DANCE COMPANY

Adjusted Trial Balance

April 30, 2018

Balance 

Account Title                                                                       Debit                          Credit             

Cash                                                                                      \(4,400

Accounts Receivable                                                        38,000            

Merchandise Inventory                                                     17,800

Office Supplies                                                                   850     

Furniture                                                                               39,900            

Accumulated Depreciation-Furniture                                                               \)8,300

Accounts Payable                                                                                                  14,100

Salaries Payable                                                                                                     1,000

Unearned Revenue                                                                                               6,500

Notes Payable, long-term                                                                                    12,000

Common Stock                                                                                                       5,000

Retained Earnings                                                                                                 36,150

Dividends                                                                             40,000            

Sales Revenue                                                                                                        178,500

Cost of Goods Sold                                                           83,700

Selling Expense                                                                 19,000

Administrative Expense                                                   16,000

Interest Expense                                                                1,900

Total                                                                                      \(261,550                   \)261,550

 

Requirements 

1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018. 

2. Journalize Rockin Robbin’s closing entries. 

3. Prepare a post-closing trial balance as of April 30, 2018.

Step-by-Step Solution

Answer

The net income of the company is $57,900.

Step-by-Step Solution Step 1: Meaning of Net Income

In accounting, net income refers to the amount of money left with a business entity after the settlement of all its expenses such as selling and administrative, interest, and taxes. Net income is computed by subtracting the operating and non-operating costs from the total revenue. 

Step 2: Preparation of multi-step income statement

ROCKIN ROBBIN DANCE COMPANY
Multi-step Income Statement
For the year ended April 30, 2018
Particulars	Amounts ($)
Sales revenue	178,500
Less: Cost of goods sold	(83,700)
Gross profit	94,800
Less: Operating expenses
Selling expense	(19,000)
Administrative expense	(16,000)
Income from operations	59,800
Less: Other expenses and losses
Interest expense	(1,900)
Net income	$57,900

Step 3: Preparation of closing entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Apr 30	Sales revenue	178,500
	Income summary		178,500
	(To close revenue account)
Apr 30	Income summary	120,600
	Cost of goods sold		83,700
	Selling expense		19,000
	Administrative expense		16,000
	Interest expense		1,900
	(To close expenses accounts)
Apr 30	Income summary (178500-120600)	57,900
	Retained earnings		57,900
	(To transfer net income)
Apr 30	Retained earnings	40,000
	Dividends		40,000
	(To close dividend account)

Step 4: Preparation of post-closing trial balance

ROCKIN ROBBIN DANCE COMPANY
Post-closing Trial Balance
As of April 30, 2018
Account Title	Debit ($)	Credit ($)
Cash	4,400
Accounts receivable	38,000
Merchandise inventory	17,800
Office supplies	850
Furniture	39,900
Accumulated depreciation-Furniture		8,300
Accounts payable		14,100
Salaries payable		1,000
Unearned revenue		6,500
Notes payable, long-term		12,000
Common stock		5,000
Retained earnings (Working notes)		54,050
Total	$100,950	$100,950

Working Notes:

Computation of Retained Earnings balance:

Particulars	Amounts ($)
Opening balance	36,150
Add: Net income	57,900
Less: Dividends	(40,000)
Closing balance	$54,050