Question

The following information was taken from the records of Sheffield Inc. for the year 2020: Income tax applicable to income from continuing operations $209,440; income tax applicable to loss on discontinued operations $28,560, and unrealized holding gain on available-for-sale securities (net of tax) $16,800. Gain on sale of equipment Loss on discontinued operations Administrative expenses Rent revenue Loss on write-down of inventory $106,400 84,000 268,800 44,800 67,200 Cash dividends declared Retained earnings January 1, 2020 Cost of goods sold Selling expenses Sales Revenue $168,000 2,400,000 952,000 336,000 2,128,000 Shares outstanding during 2020 were 100,000.

Answer 1

Preparation of the Income statement:

SHEFFIELD INC.

Income Statement

For the year ended December 31,2020

Particulars	Amount($)	Amount($)
Sales		2128000
Rent revenues		44800
Total revenues		2172800
Less:Expenses
Cost of goods sold	952000
Administrative expenses	268800
Selling expenses	336000
Total expenses		(1556800)
Income from continuing operations before tax		616000
Income tax		(209440)
Income from continuing operations		406560
Loss on discontinued operations	84000
Less:Income tax	(28560)	(55440)
Income before extraordinary items		351120
Extraordinary gain-sale of equipment	106400
Less: Income tax at 34%	(36176)	70224
		421344
Extraordinary loss-write down of inventory	67200
Less : Income tax at 34%	(22848)	(44352)
Net income		376992

Working note:

Income tax(%)

particulars	Amount($)
A) Income from continuing operations before tax	616000
B)Income tax	209440
C) Income tax (%) {B/A}	34.00%

Preparation of the comprehensive Income statement for 2020 using the two statement format

SHEFFIELD INC.

Comprehensive Income Statement

For the year ended December 31,2020

Particulars	Amount($)
Net income	376992
Other Comprehensive income:
Unrealized holding gain on AFS securities	16800
Comprehensive Income	393792

Preparation of the Retained earnings statement for the year 2020

SHEFFIELD INC.

Retained earnings statement

For the year Ended December 31,2020

particulars	Amount($)
Retained earnings- January 1	2400000
Add: Net income	376992
	2776992
Less: Dividends	(168000)
Retained earnings- December 31	2608992

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