Question

The Oromocto Corporation reports the following adjusted account balances, shown in alphabetical order, at the end of its fiscal year, February 28, 2018: Accounts payable 13,700 Income tax payable 4,300 Accounts receivable 27,600 Insurance expense 3,300 Accumulated depreciation-equipment 5,600 Prepaid insurance 3,000 Cash 18,500 Rent expense 5,800 Common shares 6,730 Retained earnings 21,370 Depreciation expense 4,600 Salaries payable 2,550 Dividends declared 1,900 Salaries expense 44,350 Equipment 23,400 Supplies 400 Fees earned 89,600 Supplies expense 4,000 Income tax expense 4,700 Utilities expense 2,300 During the year ended February 28, 2018, common shares were issued for $5,000.

Answer 1

Oromocto Corporation Adjusted Trial Balance February 28, 2018 Accounts payable Accounts receivable 13,700 27,600 Accumulated depreciation - equipment 5,600 Cash 18,500 Common shares Depreciation expense Dividends declared 6,730 4,600 1,900 Equipment 23,400 Fees earned 89,600 Income tax expense 4,700 Income tax payable 4,300 Insurance expense Prepaid insurance Rent expense Retained earnings Salaries payable Salaries expense 3,300 3,000 5,800 21,370 2,550 44,350 Supplies 400 Supplies expense Utilities expense 4,000 2,300 143,850 $ Total 143,850 %24 %24 %24

• Supplies are the inventory of consumable items. E.g. office supplies. When they are consumed it is written off as 'supplies expense'.
• The retained earnings balance of $21,370 given in adjusted trial balance is treated as its beginning balance assuming that there is no other movement in retained earnings account during the year such as stock dividend etc.
• Dividend paid is reduced from the retained earnings. The debit balance in the dividend account given in the adjusted trial balance is the dividend paid. Entries are as follows:
  • 
    Debit Credit Dividend declared 1,900 Cash 1,900 (being dividend paid in cash) Closing entry for dividend account: Retained earnings 1,900 Dividend declared 1,900 (being dividend adjusted against retained earnings) %24 %24
    
• Common shares ending balance = Beginning balance + Shares issued during the year
  • ∴ Common shares Beginning balance = Ending balance - Shares issued during the year = $6,730 - $5,000 = $1,730

OROMOCTO CORPORATION Income Statement Year Ended February 28, 2018 Revenue 89,600 Fees earned Expenses Depreciation expense 4,600 Salary expense 44,350 Rent expense 5,800 Utilities expense 2,300 Insurance expense 3,300 Supplies expense 4,000 $ 64,350 b C = a - b Income before tax 25,250 Income tax expense 4,700 Net income C - d 20,550 %24 %24

OROMOCTO CORPORATION Statement of Changes in Shareholders' Equity Year ended February 28, 2018 Total Equity Retained Earnings Common Shares 1,730 $ 21,370 $ Beginning Balance 23,100 Issuance of common stock 5,000 $ 5,000 20,550 $ (1,900) $ 40,020 $ Add: Net Income Less: Dividends Ending Balance 20,550 (1,900) 6,730 $ 46,750

OROMOCTO CORPORATION Statement of Financial Position February 28, 2018 ASSETS Current assets Cash 18,500 Accounts receivable 27,600 Supplies 400 Prepaid insurance 3,000 49,500 Total current assets Non-current assets Equipment 23,400 Less: Accumulated depreciation - equipment Total assets (5,600) $ $ 17,800 67,300 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Current liabilities Accounts payable 13,700 Salaries payable 2,550 Income tax payable 4,300 Total current liabilities 20,550 Shareholders' equity 2$ Common shares 6,730 Retained earnings 40,020 46,750 Total liabilities and shareholders' equity 67,300 %24 %24 %24 %24