Didsbury Digital Ltd. has a September 30 fiscal year end and a 15% income tax rate. The

Question:

Didsbury Digital Ltd. has a September 30 fiscal year end and a 15% income tax rate. The following information is available for its 2017 year end:
1. Earned $529,000 of service revenue and incurred $442,000 of operating expenses. Interest expense was $2,500.
2. On October 5, 2016, paid $50,000 of dividends that had been declared on September 25, 2016. 3. On September 28, 2017, declared $40,000 of dividends payable on October 8, 2017.
4. Retained earnings on September 30, 2016, were $237,500.
5. Issued common shares for $25,000 cash on July 2, 2017.
Instructions
(a) Prepare an income statement.
(b) Journalize the adjustment for income tax assuming no income tax instalments were made during the year.
(c) Prepare a statement of retained earnings.