Question

Question 2: Macaroon Corporation's capital structure consists of 20,000 common shares. At December 31, 2017 an analysis of the accounts and discussions with company officials revealed the following information: $1,200,000 18,000 Sales Sales discounts Cost of sales 747,000 Selling expenses 60,000 Accounts receivable 128,000 Cash 90,000 Common shares 200,000 Accumulated depreciation 180,000 Dividend revenue 18,000 Inventory, December 31, 2017 125,000 Unearned service revenue 4,400 Accrued interest payable Land 1,000 370,000 Patents 100,000 Retained earnings, January 1, 2017 Interest expense 270,000 17,000 General and administrative expenses 160,000 Dividends declared 29,000 Notes payable (maturity July 1, 2020) Machinery and equipment Materials and supplies Accounts payable 200,000 450,000 40,000 60,000 Assume all adjusting entries have been made. The company is subject to a 30% income tax rate. Instructions Prepare, in good form, a multiple-step income statement Prepare, in good form, a retained earnings statement. a) b)
Pleaee help me with the above accounting question, both a & b will give good rating ! thank you in advance :)

Answer 1

(a) Preparing Multiple Step Income Statement:-

MACAROON CORPORATION

Multiple Step Income Statement

For the Year Ended December 31,2017

Accounts	Amount	Amount
Sales	$1,200,000
Less:- Sales Discounts	(18,000)
Net Sales	$1,182,000
Less:- Cost of Sales	(747,000)
Gross Profit		$435,000
Less:- Operating Expenses
Selling Expense	$128,000
General and Administrative Expenses	160,000
Total Operating Expenses		$(288,000)
Operating Income		$147,000
Other Revenue and Expenses:-
Dividends Revenue	$18,000
Interest Expense	(17,000)
Total Other Revenue and Expenses		$1,000
Income Before Income Taxes		$148,000
Less:- Income Tax Expense (30%)		(44,400)
Net Income		$103,600

(b) Preparing Statement of Retained Earnings:-

MACAROON CORPORATION

Statement of Retained Earnings

For the Year Ended December 31,2017

Accounts	Amount
Retained Earnings, January 1,2017	$270,000
Add:- Net Income	$103,600
	$373,600
Less:- Dividends Declared	(29,000)
Retained Earnings, December 31,2017	$344,600

Preparing Balance Sheet:-

MACAROON CORPORATION

Balance Sheet

December 31,2017

Accounts	Amount	Amount
Assets:-
Current Assets:-
Cash	$60,000
Accounts Receivable	90,000
Materials and Supplies	40,000
Inventory, December 31,2017	125,000
Total Current Assets		$315,000
Property Plant and Equipment:-
Land	$370,000
Machinery and equipment	450,000
Less:- Accumulated Depreciation	(180,000)
Total Property Plant and Equipment		$640,000
Intangible Assets:-
Patents	$100,000
Total Intangible Assets		$100,000
Total Assets		$1,055,000
Liabilities and Stockholders Equity:-
Current Liabilities:-
Accounts Payable	$60,000
Unearned Service Revenue	4,400
Accrued Interest Payable	1,000
Income Tax Payable	44,400
Total Current Liabilities		$109,800
Long-term Liabilities:-
Notes Payable (maturity July 1,2020)	$200,000
Total Long-term Liabilities		$200,000
Stockholders Equity:-
Common Stock	$200,000
Retained Earnings, December 31,2010	344,600
Total Stockholders Equity		$544,600
Total Liabilities and Stockholders Equity		$854,400

Working Notes:-

Calculations for Income Tax Expense:-

Income tax Expense=(Income before Taxes×30%)

=($148,000×30/100)

=$44,400

Adjusting Entry for Income tax Expense:-

Date	Accounts Title	Debit	Credit
December 31	Income Tax Expense	$44,400
	Income Tax Payable		$44,400

Income tax Expense deducted from Income Before Taxes to get Net Income and Income Tax Payable Shows as Current Liabilities in Balance Sheet.

Note:-

In Above Given information Total Debits are $2,334,000 and Total Credits are $2,133,400 so the difference between Total Debits and Total Credits is $200,600 ($2,334,000-$2,133,400). Thats why there is a difference between Total Assets and Total Liabilities and Stockholders Equity is also $200,600 ($1,055,000-$854,400).