(Multiple-step Statement with Retained Earnings) Presented ...
(Multiple-step Statement with Retained Earnings) Presented below is information related to Ivan Calderon Corp. for the year 2007.
Net sales
$1,300,000
Write-off of inventory due to obsolescence
$ 80,000
Cost of goods sold
780,000
Depreciation expense omitted by accident in 2006
55,000
Selling expenses
65,000
Casualty loss (extraordinary item) before taxes
50,000
Administrative expenses
48,000
Cash dividends declared
45,000
Dividend revenue
20,000
Retained earnings at December 31, 2006
980,000
Interest revenue
7,000
Effective tax rate of 34% on all items
Instructions
1. Prepare a multiple-step income statement for 2007. Assume that 60,000 shares of common stock are outstanding.
2. Prepare a separate retained earnings statement for 2007.
|(a) Ivan Calderon Corp. |
|Income Statement |
|For the Year Ended December 31, 2007 |
|Sales Revenue | | |
| Net sales | |$1,300,000 |
| Cost of goods sold | | (780,000) |
| Gross profit on sales | | 520,000 |
| | | |
|Operating Expenses | | |
| Selling expenses |$65,000 | |
| Administrative expenses | 48,000 | (113,000) |
|Income from operations | |407,000 |
| | | |
|Other Revenues and Gains | | |
| Dividend revenue |20,000 | |
| Interest revenue | 7,000 | 27,000 |
| | |434,000 |
|Other Expenses and Losses | | |
| Write-off of inventory due to obsolescence |80,000 | |
| Casualty loss | 50,000 | (130,000) |
| | | |
|Income before income tax | |304,000 |
| Income tax | | (103,360) |
|Net income | |$ 200,640 |
|(b) Ivan Calderon Corp. |
|Retained Earnings Statement |
|For the Year Ended December 31, 2007 |
|Retained earnings, Jan. 1, as reported |$ 980,000 |
|Correction for overstatement of net income in prior period | |
|(depreciation error) (net of $18,700 tax) |(36,300) |
|Retained earnings, Jan. 1, as adjusted | 943,700 |
|Add: Net income | 200,640 |
| | 1,144,340 |
|Less: Dividends declared | (45,000) |
|Retained earnings, Dec. 31 |$1,099,340 |
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