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1. Using the balances from the trial balance below, prepare; a) The multi step income statement b) The statement of retained earnings c) The balance sheet
Land 45,000 (DR)
Buildings 6,000 (DR)
Machinery 4,000(DR)
Mortgage 37,000(CR)
Dividends 6,000 (DR)
Common stock 15,000(CR)
Inventories 6,100(DR)
Cash 4,000(DR)
CoGS 56,400(DR)
Interest revenue 3,200(CR)
Trade payable 3,705(CR)
Tax expense 7,730(DR)
Sales 80,875(CR)
Trade receivable 2,300(DR)
Admin expense 900(DR)
Selling expense 400(DR)
Interest expense 950(DR)
139,780 (DR) 139,780(CR)
Expert Answer
a) The multi step income statement
| INCOME STATEMENT | |
| For the year ended | |
| Sales Revenue | 80875 |
| Less- COGS | 56400 |
| Gross profit | 24475 |
| Add- Other revenues and gains | 3200 |
| Less- Other expenses and losses | 2250 |
| Income before tax | 25425 |
| Less- tax | 7730 |
| Net income for the year | 17695 |
Other expenses and losses = Admin expense + Selling expense +Interest expense
= 900+ 400 + 950
= 2250
b) The statement of retained earnings
| Statement of retained earnings | |
| Net income for the year | 17695 |
| Less- Dividend | 6000 |
| Retained earnings | 11695 |
c) The Balancesheet
| BALANCE SHEET | |
| ASSETS | |
| Current assets | 12400 |
| Fixed assets | 55000 |
| Total Assets | 67400 |
| EQUITY & LIABILITIES | |
| Current liabilities | 3705 |
| Long term liabilities | 37000 |
| Equity | 26695 |
| Total Liabilities | 67400 |
Fixed assets= Land + building + machinery
= 45000+6000 + 4000
= 55000
Current assets = Inventories + cash + trade receivable
=6100+4000+2300
= 12400
Equity = common stock +retained earnings
= 15000 + 11695
= 26695
