Question

Little Tots Ltd. sells children’s clothing. At the end of December 2016 (its first year of operations), it had the following account balances:
Accounts receivable .................. $ 2,500
Rent expense .................... 3,600
Cash .......................... 3,500
Wages payable ...................... 400
Equipment ...................... 5,000
Depreciation expense ............... 500
Wage expense .................... 26,000
Prepaid rent ...................... 300
Cost of goods sold ................ 34,900
Sales revenue .................... 69,900
Bank loan payable (due in two years) ........ 4,800
Advertising expense ................ 800
Accounts payable .................. 2,000
Utilities expense .................... 300
Dividends declared ............... 1,200
Common shares .................... 10,000
Interest expense ................ 100
Inventory ....................... 8,000
Miscellaneous expenses ................ 400
Retained earnings ................. ?
Required:
a. Calculate the net income for the year by adding the revenue and deducting all the expenses.
b. Calculate the retained earnings by following the process outlined below:
Balance in retained earnings at the beginning of the year ......... $ 0*
Add: Net income for the year ......................... ?
Deduct: Dividends declared during the year
Balance in Retained Earnings at the end of the year ............. U
*The beginning balance is zero because this was the company’s first year of operations.
c. Prepare a classified statement of financial position.


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  • CreatedJune 11, 2015
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