Peter Company reported the following amounts for the year ended 31 December 2020: Inventory at 1 January 2020 $189,000 Inventory at 31 December 2020 $284,250 Sales $2,100,000 Sales discounts $45,000 Purchases $780,000 Loss on sale of investment $13,500 Purchase returns and allowances $16,500 Sales returns and allowances $41,250 Transportation-in $28,530 Interest expenses $9,000 Selling expenses $241,650 Administrative expenses $193,320 Loss from operations of a discontinued division $225,000 Gain on disposal of a discontinued division $170,000 Loss on disposal of part of the retail division $7,500 Rent revenue $180,000 Retained earnings at 1 January 2020 $1,485,000 Additional information: (1)Depreciation on a delivery van had not been recorded for years 2019 and 2020 as at 31 December 2020. The van was purchased on 1 July 2019 at a cost of $200,000. The residual value and useful life were estimated to be $10,000 and 5 years respectively. Double-declining balance method is to be used for the computation of depreciation on this van. (2)The income tax rate applicable for year 2020 was 30%. (3)Peter Company changed its method of accounting for inventory from the first-in first-out method to the average cost method. Inventory in 2020 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $125,000 of cost of goods sold (before taxes) being reported on prior years' income statement. (4)100,000 shares of ordinary shares were outstanding during the year and $45,000 preference dividend was declared for 2020 Required: (a)Prepare an income statement for the year ended 31 December 2020. (b)Prepare a retained earnings statement for the year ended 31 December 2020.
Peter Company reported the following amounts for the year ended 31 December 2020:
Inventory at 1 January 2020 $189,000
Inventory at 31 December 2020 $284,250
Sales $2,100,000
Sales discounts $45,000
Purchases $780,000
Loss on sale of investment $13,500
Purchase returns and allowances $16,500
Sales returns and allowances $41,250
Transportation-in $28,530
Interest expenses $9,000
Selling expenses $241,650
Administrative expenses $193,320
Loss from operations of a discontinued division $225,000
Gain on disposal of a discontinued division $170,000
Loss on disposal of part of the retail division $7,500
Rent revenue $180,000
Additional information:
(1)
(2)The income tax rate applicable for year 2020 was 30%.
(3)Peter Company changed its method of accounting for inventory from the first-in first-out method to the average cost method. Inventory in 2020 was correctly recorded using the average cost method. The new inventory method would have resulted in an additional $125,000 of cost of goods sold (before taxes) being reported on prior years' income statement. (4)100,000 shares of ordinary shares were outstanding during the year and $45,000 preference dividend was declared for 2020
Required:
(a)Prepare an income statement for the year ended 31 December 2020. (b)Prepare a retained earnings statement for the year ended 31 December 2020.
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