Question 4P-B
Question
The following account balances were included in the trial balance of Twain Corporation at June 30, 2017.
Sales revenue \(1,578,500
Depreciation expense (office furniture and equipment) \)7,250
Sales discounts \(31,150
Cost of goods sold \)896,770
Property tax expense \(7,320
Salaries and wages expense (sales) \)56,260
Bad debt expense (selling) \(4,850
Sales commissions \)97,600
Maintenance and repairs expense (administration) \(9,130
Travel expense (salespersons) \)28,930
Delivery expense \(21,400
Office expense \)6,000
Entertainment expense \(14,820
Sales returns and allowances \)62,300
Telephone and Internet expense (sales) \(9,030
Dividends received \)38,000
Depreciation expense (sales equipment) \(4,980
Interest expense \)18,000
Maintenance and repairs expense (sales) \(6,200
Income tax expense \)102,000
Miscellaneous selling expenses \(4,715
Depreciation understatement due to error—2014 (net of tax) \)17,700
Office supplies used \(3,450
Telephone and Internet expense (administration) \)2,820
Dividends declared on preferred stock \(9,000
Dividends declared on common stock \)37,000
The Retained Earnings account had a balance of $337,000 at July 1, 2016. There are 80,000 shares of common stock outstanding.
Instructions
(b) Using the single-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2017.
Step-by-Step Solution
VerifiedThe net income of the company is $221,525.
The balance in the retained earnings statement is $494,825.
A single-step income statement is a simplified format of presenting net income generated by a business entity. Such an income statement directly reports the revenues and expenses and ascertains net income.
In the books of Twain Corporation Single-step Income Statement For the year ended June 30, 2017 | |
Particulars | Amounts ($) |
Revenues |
|
Net sales | 1,485,050 |
Add: Dividend revenue | 38,000 |
Total revenues | 1,523,050 |
Expenses |
|
Cost of goods sold | 896,770 |
Selling expenses | 248,785 |
Administrative expenses | 35,970 |
Interest expenses | 18,000 |
Total expenses | (1,199,525) |
Income before tax | 323,525 |
Less: Income tax expense | (102,000) |
Net income | 221,525 |
Earnings per share (221525-9000)/80000 | $2.66 |
In the books of Twain Corporation Retained Earnings Statement For the year ended June 30, 2017 | |
Particulars | Amounts ($) |
Balance as of July 1, 2016 | 337,000 |
Correction of depreciation understatement | (17,700) |
Add: Net income | 221,525 |
Less: Dividend declared on preferred stock | (9,000) |
Less: Dividend declared on common stock | (37,000) |
Balance as of June 30, 2017 | $494,825 |