Question

The following information was taken from the records of Blue Inc. for the year 2020: Income tax applicable to income from continuing operations $228,140; income tax applicable to loss on discontinued operations $31,110, and unrealized holding gain on available-for-sale securities (net of tax) $18,300. Gain on sale of equipment $115,900 Cash dividends declared $183,000 Loss on discontinued operations 91,500 Retained earnings January 1, 2020 3,000,000 Administrative expenses 292,800 Cost of goods sold 1,037,000 Rent revenue 48,800 Selling expenses 366,000 Loss on write-down of inventory 73,200 Sales Revenue 2,318,000 Shares outstanding during 2020 were 100,000.

Prepare a comprehensive income statement for 2020, using the two statement format.

Prepare a retained earnings statement for 2020. (List items that increase retained earnings first.)

Answer 1

Answer is given below. explanation is given in front of some items to make the concept clear

Blue Inc. Comprehensive Income Statement For the year ended December 31st, 2020 Net Income Other Comprehensive income: Unrealised holding gain on AFS securities Comprehensive Income $410,652 $18,300 $428,952 Blue Inc. Retained Earnings Statement For the year ended December 31st, 2020 Retained Earnings - January 1 Add: Net Income $3,000,000 $410,652 $3,410,652 $183,000 $3,227,652 Less: Dividends declared Retained Earnings - December 31st Working notes: $2,318,000 $48,800 $2,366,800 Blue Inc. Income Statement For the year ended December 31st, 2020 Sales Rent revenues Total Revenues Less: Expenses Cost of Goods sold $1,037,000 Administrative expenses $292,800 Selling expense $366,000 Total Expense Income from Continuing Operations before tax Income tax Income from Continuing Operations Loss on discontinued operations $91,500 Less: Income tax $31,110 Income before extraordinary items Extra ordinary gain - Sale of equipment $115,900 Less: Income tax at 34% $39,406 $1,695,800 $671,000 $228,140 $442,860 $60,390 $382,470 $76,494 $458,964 Extra ordinary loss-write down of inventory Less: Income tax at 34% Net Income $73,200 $24,888 $48,312) $410,652 Income tax % Income from Continuing Operations before tax Income tax Income tax % $671,000 B $228,140 A 34.00% A/B