Question

The following is the trial balance of Thompson Corporation at December 31, 2020. Credit 10,000 $ $ $ $ $ 18,000 160,000 18,000 1,100,000 $ 49,000 28,000 $ $ 70,000 THOMPSON CORPORATION Trial Balance December 31, 2020 Debit Purchase Discounts Cash $ 189,700 Accounts Receivable $ 105,000 Rent Revenue Retained Earnings Salaries and Wages Payable Sales Revenue Notes Receivable $ 110,000 Accounts Payable Accumulated Depreciation-Equipment Sales Discounts $ 14,500 Sales Returns and Allowances $ 17,500 Notes Payable Selling Expenses $ 232,000 Administrative Expenses $ Common Stock Income Tax Expense 53,900 Cash Dividends 45,000 Allowance for Doubtful Accounts Supplies 14,000 Freight-in $ 20,000 Land $ 70,000 Equipment $ 140,000 Bonds Payable Gain on Sale of Land Accumulated Depreciation - Buildings Inventory $ 89,000 Buildings $ 98,000 Purchases $ 610,000 Totals $ 1,907,600 $ 300,000 5,000 $ $ $ 100,000 30,000 19,600 $ 1,907,600 A physical count of inventory on December 31 resulted in an inventory amount of $64,000. Thus, cost of goods sold for 2020 is $645,000.

Answer 1

Solution:

Thompson Corporation

Income statement

For the year ended December 31,2020

Revenues:
Net sales ($1,100,000 - $14,500 - $17,500)	$1,068,000
Gain on sale of land	$30,000
Rent revenues	$18,000
Total revenues		$1,116,000
Expenses:
Cost of good sold	$645,000
Selling expenses	$232,000
Administrative expenses	$99,000
Total expenses		$976,000
Income before income taxes		$140,000
Income tax expenses		$53,900
Net income		$86,100
Earnings per share ($86,100/30,000)		$2.87

Explanation of net sales

Sales revenues	$1,100,000
Sales discount	$14,500
Sales Returns and allowances	$17,500
Net sales	$1,068,000

Explanation of cost of goods sold

Computation of cost of goods sold

Inventory, jan 1		$89,000
Purchase	$610,000
Less: purchase discounts	$10,000
Net purchase	$600,000
Add: freight in	$20,000	$620,000
Inventory available for sale		$709,000
Less: inventory, December 31		$64,000
Cost of goods sold		$645,000

2.

Thompson Corporation

Statement of Retained Earnings

For the Year Ended December 31, 2020

Retained earnings,January 1,	$160,000
Add: Net income	$86,000
Total	$246,000
Less: Cash dividends	$45,000
Retained earnings, December 31,	$201,000

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