Question

Presented below is information related to Waterway Corp. for the year 2020.

Net sales		$1,508,000		Write-off of inventory due to obsolescence		$92,800
Cost of goods sold		904,800		Depreciation expense omitted by accident in 2019		63,800
Selling expenses		75,400		Casualty loss		58,000
Administrative expenses		55,680		Cash dividends declared		52,200
Dividend revenue		23,200		Retained earnings at December 31, 2019		1,136,800
Interest revenue		8,120		Effective tax rate of 20% on all items

Partially correct answer iconYour answer is partially correct.

Prepare a multiple-step income statement for 2020. Assume that 70,528 shares of common stock are outstanding for the entire year. (Round earnings per share to 2 decimal places, e.g. 1.49.)

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

Answer 1

Waterway Corp.
Income Statement
For the Year Ended December 31, 2020
Revenues:
Net sales		1508000
Less: Cost of goods sold		904800
Gross profit / (loss)		603200
Operating Expenses:
Selling expenses	75400
Administrative expenses	55680
Total operating expenses		131080
Income from operations		472120
Other Revenues and Gains:
Dividend revenue	23200
Interest revenue	8120
		31320
		503440
Other Expenses and Losses:
Casualty loss		58000
Write-off of inventory due to obsolescence		92800
Income before income tax		352640
Less: Income tax (20%)		70528
Net income		282112
Earnings per common share		4.00
Waterway Corp.
Statement of Retained Earnings
For the Year Ended December 31, 2020
Retained earnings, January 1, as reported	1136800
Correction for overstatement of net income in prior period	51040
Retained earnings, January 1, as adjusted	1187840
Add: Net income / (loss)	282112
	1469952
Less: Dividends declared	52200
Retained earnings, December 31	1417752