Palm Tree Limited has the following financial statements: Palm Tree Limited Income Statement For the Year Ended December 31, 2022 Net sales $165,000 Cost of goods sold 97,500 Gross profit 67,500 Operating expenses 27,500 Income from operations 40,000 Interest expense 3,500 Income before income taxes 36,500 Income Tax 11,000 Net Income $ 25,500 Palm Tree Limited Income Statement For the Year Ended December 31, 2022 2022 2021 Cash $15,000 $9,750 Accounts receivable 11,750 8,750 Inventories 16,500 11,750 Prepaid insurance 2,500 2,000 Equipment 25,500 33,500 Accumulated depreciation—equipment (16,250) (17,750) Total assets $55,000 $48,000 Accounts payable $5,000 $6,750 Wages payable 2,000 2,000 Income taxes payable 3,000 1,000 Long-term note payable 0 8,750 Common shares 15,000 15,000 Retained earnings 30,000 14,500 Total liabilities and shareholders’ equity $55,000 $48,000 Additional information Equipment that cost $8,000 was sold for the carrying amount of $3,750 Dividends declared and paid were $10,000. Required Prepare the operating activities section for the statement of cash flows using the direct method. Question 4.5 (Total: 12 marks; 2 marks per line) The records of Groot Corp. for calendar 2020 reflected the following correct pre-tax amounts: Gain from discontinued operations, $50,000; Cash dividends declared and paid, $45,000; Retained earnings, January 1, 2020, $275,000, Correction of accounting error, $35,000 debit; Income before income taxes and before discontinued operations, $165,000. The average income tax rate of 40% applies to all items except the dividends. Required Calculate the December 31, 2020 ending balance of retained earnings.
Palm Tree Limited has the following financial statements:
|
Palm Tree Limited Income Statement For the Year Ended December 31, 2022 |
|
|
Net sales |
$165,000 |
|
Cost of goods sold |
97,500 |
|
Gross profit |
67,500 |
|
Operating expenses |
27,500 |
|
Income from operations |
40,000 |
|
Interest expense |
3,500 |
|
Income before income taxes |
36,500 |
|
Income Tax |
11,000 |
|
Net Income |
$ 25,500 |
|
Palm Tree Limited Income Statement For the Year Ended December 31, 2022 |
||
|
2022 |
2021 |
|
|
Cash |
$15,000 |
$9,750 |
|
|
11,750 |
8,750 |
|
Inventories |
16,500 |
11,750 |
|
Prepaid insurance |
2,500 |
2,000 |
|
Equipment |
25,500 |
33,500 |
|
|
(16,250) |
(17,750) |
|
Total assets |
$55,000 |
$48,000 |
|
Accounts payable |
$5,000 |
$6,750 |
|
Wages payable |
2,000 |
2,000 |
|
Income taxes payable |
3,000 |
1,000 |
|
Long-term note payable |
0 |
8,750 |
|
Common shares |
15,000 |
15,000 |
|
|
30,000 |
14,500 |
|
Total liabilities and shareholders’ equity |
$55,000 |
$48,000 |
Additional information
- Equipment that cost $8,000 was sold for the carrying amount of $3,750
- Dividends declared and paid were $10,000.
Required
Prepare the operating activities section for the statement of
Question 4.5 (Total: 12 marks; 2 marks per line)
The records of Groot Corp. for calendar 2020 reflected the following correct pre-tax amounts:
- Gain from discontinued operations, $50,000;
- Cash dividends declared and paid, $45,000;
- Retained earnings, January 1, 2020, $275,000,
- Correction of accounting error, $35,000 debit;
- Income before income taxes and before discontinued operations, $165,000.
The average income tax rate of 40% applies to all items except the dividends.
Required
Calculate the December 31, 2020 ending balance of retained earnings.
Step by step
Solved in 2 steps with 3 images
