(TCOs B and D) The following items are taken from the financial statements of Bu

Question

(TCOs B and D) The following items are taken from the financial statements of Butler Company for 2012: Accounts Receivable $20,000 Cost of Goods Sold 95,000 Utilities Expense 3,500 Accounts Payable 7,000 Common Stock 100,000 Rent Expense 5,500 Advertising Expense 9,000 Dividends 10,000 Insurance Expense 2,000 Note Payable (due 2014) 50,000 Depreciation Expense 10,000 Prepaid Insurance 18,000 Accumulated Depreciation 30,000 Retained Earnings (beginning) 33,000 Salaries Expense 40,000 Salaries Payable 4,500 Net sales 170,000 Supplies 3,000 Supplies Expense 2,500 Instructions (a) Calculate the net income. (18 points) (b) Calculate the balance of Retained Earnings that would appear on a Balance Sheet at December 31, 2012. (7 points) (c) Calculate the gross profit percentage. (5 points) (Points : 30)

Explanation / Answer

Butler Company Income statement for the period ended Dec 31.2012. Details Amt $ Net Sales              170,000 Less : Cost of Goods Sold              95,000 c Gross Profit                75,000 Less Opertaing Expenses Utilities Expense                3,500 Rent Expense                5,500 Advertising Expense                9,000 Insurance Expense                2,000 Depreciation Expense              10,000 Salaries Expense              40,000 Supplies Expense                2,500 Total Expenses              72,500 a Net Income                2,500 b Retained Earning Balance As on Dec 31 2012. Retained Earning beginning balance              33,000 Add: Net Income in 2012                2,500 Less : Dividends paid in 2012              (1,000) Reatined Earning Closing Balance Dec 31.2012.              34,500

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