Crowley Company has the following ledger accounts and adjusted balances as of De

Question

Crowley Company has the following ledger accounts and adjusted balances as of December 31, 2017. All accounts have normal balances. Crowley’s income tax rate is 40%.

Accounts Payable……………………………. 28,125

Accounts Receivable………………………… 202,500

Accumulated Depreciation-Building………… 56,250

Administrative Expenses……………………. 60,750

Allowance for Doubtful Accounts………….. 22,500

Bonds Payable (Mature 2020)………………. 281,250

Building……………………………………… 416,250

Cash…………………………………………. 28,125

Common Stock……………………………… 300,000

Cost of Goods Sold…………………………. 450,000

Dividends…………………………………… 18,000

Gain on Sale of Land…………………………..21,000

Interest Revenue…………………………….. 22,500

Inventory…………………………………….. 315,000

Land…………………………………………. 258,750

Loss from Operations of Division X………… 52,500

(Division X is a component of Larson Company) Loss from Sale of Division X........................... 49,500

(Division X is a component of Larson Company) Patent………………………………………… 33,750

Paid-In Capital in Excess of Par ……………. 150,000

Prepaid Rent…………………………………. 11,250*

Retained Earnings, January 1, 2017………… 247,050

Sales Returns and Allowances……………… 10,500

Sales Revenue………………………………1,023,000

Selling Expenses……………………………. 112,500

*Three years rent paid in advance for offsite document storage. Crowley has 200,000 shares of $10 par common stock authorized and has no treasury stock. Instructions:

Use this information to prepare a multiple-step income statement, a retained earnings statement, and a classified balance sheet.

Explanation / Answer

PART 1. INCOME STATEMENT

SALES..............................................................................1023000

LESS: SALE RETURN......................................................10500

NET SALES.......................................................................1012500

LESS: COST OF GOODS SOLD.......................................450000

GROSS PROFIT................................................................562500

LESS: ADMINISTRATIVE EXPENSES..............................60750

SELLING EXPENSES........................................................112500

PROFIT FROM BUSINESS OPERATIONS.......................389250

LESS: LOSS FROM OPERATIONS OF DIVISION X.........52500

NET INCOME FROM BUSINESS OPERATIONS..............336750

ADD/LESS OTHER INCOME / LOSSES

ADD: INTEREST REVENUE..............................................22500

ADD: GAIN ON SALE OF LAND........................................21000

LESS: LOSS FROM SALE OF DIVISION X......................49500

NET INCOME BEFORE TAX............................................330750

PART 2 : RETAINED EARNING STATEMENT

OPENING BALANCE........................................................247050

ADD: NET INCOME OF CURRENT YEAR.......................330750

LESS: DIVIDEND PAID......................................................18000

LESS: INCOME TAX PAYABLE OF CURRENT YEAR

(330750* 40%)....................................................................132300

CLOSING BALANCE..........................................................427500

PART C: BALANCE SHEET AS ON DECEMBER 31, 2017

LIABILITIES

COMMON STOCK

(AUTHOROZIED - 200000 SHARES @ 10)

ISSUED (30000 SHARES @ 10).................................................300000

PAID - IN CAPITAL IN EXCESS OF PAR.....................................150000

RETAINED EARNINGS................................................................427500

INCOME TAX PAYABLE................................................................132300

ACCOUNTS PAYABLE..................................................................28125

ACCUMULATED DEPRECIATION ON BUILDING........................56250

ALLOWANCE FOR DOUBTFUL ACCOUNTS.............................. 22500

BONDS PAYABLE.........................................................................281250

TOTAL..........................................................................................1397925

ASSETS

ACCOUNTS RECEIVABLE...........................................................202500

BUILDING.....................................................................................416250

CASH............................................................................................ 28125

INVENTORY..................................................................................315000

LAND.............................................................................................258750

PATENT..........................................................................................33750

PREPAID RENT.............................................................................11250

TOTAL..........................................................................................1265625

NOTE :- THERE IS A DIFFERENCE IN BALANCE SHEET OF 132300 BECAUSE THERE IS ALSO A DIFFERENCE OF 132300 IN BALANCES GIVEN ABOVE.

THIS IS A TRIAL BALANCE OF LEDGER BALANCES GIVEN ABOVE IN QUESTION

ACCOUNT NAME DEBIT CREDIT ACCOUNTS PAYABLE 28125 ACCOUNTS RECEIVABLE 202500 ACC DEP ON BUILDING 56250 ADMINISTRATIVE EXPENSES 60750 ALLOWANCE FOR DOUBTFUL DEBTS 22500 BONDS PAYABLE 281250 BUILDING 416250 CASH 28125 COMMON STOCK 300000 COST OF GOODS SOLD 450000 DIVIDEND 18000 GAIN ON SALE OF LAND 21000 INTEREST REVENUE 22500 INVENTORY 315000 LAND 258750 LOSS IN DIV X 52500 LOSS ON SALE OF DIV X 49500 PATENT 33750 PAID IN CAPITAL IN EXCESS OF PAR 150000 PREPAID RENT 11250 RETAINED EARNING ON JAN 1 2017 247050 SALE RETURN 10500 SALES 1023000 SELLING EXPENSES 112500 2019375 2151675 DIFFERENCE 132300

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