Acct 550 Homework Week2

Chapter 4: E4-4, E4-12 & P4-1

E4-4 (Single-Step Income Statement) The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2014. Fortunately, the controller had kept certain statistical data related to the income statement as follows.

1. The beginning merchandise inventory was $92,000 and decreased 20% during the current year.

2. Sales discounts amount to $17,000.

3. 20,000 shares of common stock were outstanding for the entire year.

4. Interest expense was $20,000.

5. The income tax rate is 30%.

6. Cost of goods sold amounts to $500,000.

7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales.

8. Four-fifths of the operating expenses relate to sales activities.

Instructions

From the foregoing information prepare an income statement for the year 2014 in single-step form.

Sale revenue 1,250,000

Sales discount (17,000)

Net sales 1,233,000

Cost of goods sold 500,000

Administrative expenses 20% x 500,000 = 100,000

Gross sale 8% x X = 100,000 => X = 100,000/.08 = 1,250,000

LeRoi Jones Inc.

Income Statement

For the year ended December 31, 2014

Revenue

Net sales 1,233,000

Expenses

Cost of goods sold 500,000

Administrative expenses 100,000

Interest expnese 20,000

Income tax 30% 183,900

Total expenses 803,900

Net income 429,100

Earning per share (429100/20000) 21.46

Retained earnings January 1, 2012 40,000

Add: Net Income 125,000

Less: Dividends (50,000)

Retained earnings December 31, 2012 115,000

Retained earnings January 1, 2013 115,000

Add: Net icome 160,000

Less Dividends (50,000)

Retained earnings December 31, 2013 225,000

Income before tax 2014 240,000

Prior period adjustment 25,000

Cumulative decrease income (35,000) 230,000

Income tax 40% 92,000

Net income 138,000

a.

Eddie Zambrano Corporation

Retained Earnings Statement

For the Year Ended December 31, 2014

Retained earnings, January 1 225,000

Add: Net...