Question

Exercise 4-09 Presented below is information related to Blue Corp. for the year 2020. Net sales Cost of goods sold Selling expenses Administrative expenses Dividend revenue Interest revenue $1,586,000 951,600 79,300 58,560 24,400 8,540 Write-off of inventory due to obsolescence Depreciation expense omitted by accident in 2019 Casualty loss Cash dividends declared Retained earnings at December 31, 2019 Effective tax rate of 20% on all items $97,600 67,100 61,000 54,900 1,195,600

Answer 1

BLUE CORP.
Income Statement
For the Year Ended December 31, 2020
Revenue
Net Sales		$1,586,000
Cost of Goods Sold		$951,600
Gross Profit / (Loss)       [$1,586,000 - $951,600]		$634,400
Operating Expenses:
Selling Expenses	$79,300
Administrative Expenses	$58,560
Total Operating Expenses [$79,300 + $58,560]		$137,860
Income From Operations     [$634,400 - $137,860]		$496,540
Other Revenue and Gains:
Dividend Revenue	$24,400
Interest Revenue	$8,540
[$24,400 + $8,540]		$32,940
[$496,540 + $32,940]		$529,480
Other Expenses and Gains:
Casualty Loss		$61,000
Write-Off of Inventory Due to Obsolescence		$97,600
Income Before Income Tax        [$529,480 - $61,000 - $97,600]		$370,880
Income Tax Expense                   [$370,880 x 20%]		$74,176
Net Income / (Loss)                   [$370,880 - $74,176]		$296,704
Earnings Per Share
Net Income / (Loss)       [$296,704 / 74,176 shares]		$4.00

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BLUE CORP.
Retained Earnings Statement
For the Year Ended December 31, 2020
Retained Earnings, January 1, as reported	$1,195,600
Correction for Overstatement of Net Income in Prior Period	$67,100
Retained Earnings, January 1, as adjusted     [$1,195,600 - $67,100]	$1,128,500
Add: Net Income	$296,704
	$1,425,204
Less: Dividend Declared	$54,900
Retained Earnings, December 31	$1,370,304