Delta Corporation’s capital st

Delta Corporation’s capital structure consists of 20,000 commonshares at December 31. At December 31, 2020 an analysis of theaccounts and discussions with company officials revealed thefollowing information:

      Sales…………………………………………………………………………………….       $1,300,000

       Inventory, January 1,2020……………………………………………………..       150,000

      Purchases……………………………………………………………………………..       728,000

       Purchasediscounts…………………………………………………………………       18,000

       Inventory, December 31,2020………………………………………………..       130,000

       Tornado loss (net after$18,000 tax) ……………………………………….       42,000

       Sellingexpenses……………………………………………………………………       148,000

      Cash…………………………………………………………………………………….       60,000

       Accountsreceivable………………………………………………………………       90,000

       Commonshares…………………………………………………………………….       200,000

       Accumulateddepreciation………………………………………………………       180,000

       Dividendrevenue…………………………………………………………………..22,000

       Unearned servicerevenue……………………………………………………….       4,400

       Accrued interestpayable………………………………………………………..       1,000

      Land…………………………………………………………………………………….       370,000

      Patents………………………………………………………………………………….       100,000

       Retained earnings, January1, 2020………………………………………….       350,000

       Interestexpense…………………………………………………………………….       15,000

       Prior years cumulativeeffect of change from straight-line to accelerated

       depreciation (net after$15,000 tax)……………………………………………..45,000

       General and administrativeexpenses……………………………………….       172,000

       Dividendsdeclared………………………………………………………………..       52,750

       Allowance for doubtfulaccounts……………………………………………..       5,000

       Notes payable (maturityJuly 1, 2021)………………………………………       200,000

       Machinery andequipment………………………………………………………       450,000

       Materials and suppliesinventory……………………………………………….       40,000

       Accountspayable………………………………………………………………….       60,000

Unless indicated otherwise, you may assume a 25% income taxrate.

Required:

a)    Prepare, in good form, a multiple-stepincome statement

b)    Prepare, in good form, a retained earningsstatement.

Answer:

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Delta Corporation’s
Income Statement Amount $ Amount $
SalesRevenue 1,300,000.00
Total Revenue      1,300,000.00
Less:Cost of Goods Sold
Inventory, January 1, 2020      150,000.00
Add:Purchases      728,000.00
Less:Purchases Discounts        18,000.00
Less:Inventory, December 31, 2020..      130,000.00
Cost of Goods Sold        730,000.00
Gross profit        570,000.00
Sellingexpense      148,000.00
Generaland administrative expenses      172,000.00
Operating expenses        320,000.00
Operating income        250,000.00
Other income (expenses)
Dividendrevenue        22,000.00
Interestexpense       (15,000.00)
Other income (expenses)             7,000.00
Income from continuing operations before tax        257,000.00
Less:Income Tax           64,250.00
Income from continuing operations        192,750.00
Discontinued operations:
TornadoLoss (net of tax)          (42,000.00)
Earning before prior period items        150,750.00
Prioryears cumulative effect of change from straight-line to accelerateddepreciation (net after $15,000 tax)          (45,000.00)
Net Income        105,750.00
Statement of retained earnings Amount $
OpeningBalance         350,000.00
Add: NetIncome         105,750.00
Less:Dividend declared           52,750.00
Retained earnings on Dec 31, 2020        403,000.00

 
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