Question 2: (21 points)
The adjusted balance for Actinolite Automobiles Inc. at December 31, 2023 is presented below. Actinolite’s income tax rate is 25% and journal entries for income tax expense have not yet been prepared. There were no common share transactions during the year.
Actinolite Automobiles Inc. Adjusted Trial Balance December 31, 2023 |
||
Debit |
Credit |
|
Accounts payable |
$44,620 |
|
Accounts receivable |
$25,430 |
|
Accumulated depreciation – equipment |
14,300 |
|
Accumulated depreciation – building |
95,500 |
|
Accumulated other comprehensive income – Jan 1, 2023 |
0 |
|
Advertising expense |
9,700 |
|
Building |
400,000 |
|
Cash |
157,000 |
|
Cash dividends – common |
10,000 |
|
Common shares (10,000 shares issued) |
250,000 |
|
Contributed surplus – reacquisition of common shares |
6,000 |
|
Cost of goods sold |
417,000 |
|
Depreciation expense |
20,000 |
|
Dividends payable |
10,000 |
|
Equipment |
80,000 |
|
Gain on sale of equipment |
850 |
|
Income tax expense |
0 |
|
Income tax payable |
0 |
|
Interest expense |
2,550 |
|
Merchandise inventory |
66,140 |
|
Office expense |
8,500 |
|
Other comprehensive income – holding loss on equity investment (before income tax) |
2,250 |
|
Retained earnings – Jan 1, 2023 |
57,300 |
|
Sales |
720,000 |
|
TOTALS |
1,198,570 |
1,198,570 |
Required:
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Part a | |||||
Sales | $ 720,000 | ||||
Cost of goods sold | $ (417,000) | ||||
Gross profit | $ 303,000 | ||||
Operating expenses | |||||
Depreciation expense | $ 20,000 | ||||
Office expense | $ 8,500 | ||||
Advertising expense | $ 9,700 | $ (38,200) | |||
Profit from operations | $ 264,800 | ||||
Other revenues | |||||
Gain on sale of equipment | $ 850 | ||||
$ 265,650 | |||||
Other expenses | |||||
Interest expense | $ (2,550) | ||||
Profit before income taxes | $ 263,100 | ||||
Income tax expense 25% | $ (65,775) | ||||
Profit | $ 197,325 | ||||
Other comprehensive income | |||||
Loss on equity investment, net | |||||
of $563 income tax savings | $ (1,688) | ||||
Comprehensive income | $ 195,638 | ||||
Part b | |||||
Common Shares | Contributed Surplus– Reacquisition of Common Shares | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |
Balance, January 1 | $ 250,000 | $ 6,000 | $ 57,300 | - | $ 313,300 |
Dividends | $ (10,000) | $ (10,000) | |||
Comprehensive income | $ 197,325 | $ (1,688) | $ 195,638 | ||
Balance, December 31 | $ 250,000 | $ 6,000 | $ 244,625 | $ (1,688) | $ 498,938 |
Part c | |||||
Shareholders' equity | |||||
Contributed capital | |||||
Share capital: | |||||
Common shares, 10,000 shares issued | $ 250,000 | ||||
Other contributed capital: | |||||
Contributed surplus—reacquisition of Common shares | $ 6,000 | ||||
Total contributed capital | $ 256,000 | ||||
Retained earnings | $ 244,625 | ||||
Accumulated other comprehensive income (loss) | $ (1,688) | ||||
Total shareholders' equity | $ 498,938 |
Question 2: (21 points) The adjusted balance for Actinolite Automobiles Inc. at December 31, 2023 is...
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