Exercise 4-9 Presented below is information related to Windsor Corp. for the yea

ID: 3195219 • Letter: E

Question

Exercise 4-9

Presented below is information related to Windsor Corp. for the year 2017. Net sales $1,354,900 Write-off of inventory due to obsolescence $82,650 Cost of goods sold 784,400 Depreciation expense omitted by accident in 2016 46,300 Selling expenses 70,000 Casualty loss 48,400 Administrative expenses 49,100 Cash dividends declared 42,320 Dividend revenue 22,800 Retained earnings at December 31, 2016 1,000,870 Interest revenue 7,590 Effective tax rate of 34% on all items

Prepare a multiple-step income statement for 2017. Assume that 62,660 shares of common stock are outstanding. (Round earnings per share to 2 decimal places, e.g. 1.49.)

Prepare a separate retained earnings statement for 2017. (List items that increase adjusted retained earnings first.)

Explanation / Answer

Sales Revenue

Net Sales ....................................... $1,354,900

Cost of the goods sold ............................ 784,400

Gross Profit 5,70,500

Operating Expenses

Selling expenses ...................................... $ 70,000

Administrative expenses ........................... 49,100

Total 1,19,100

Income from after the operations expenses = 5,70,500 - 1.19,100 = 4,51,400

Other Revenues and Gains

Dividend revenue ..................................... $ 22,800

Interest revenue ..................................... 7,590

30,390

Income = 4,51,400 - 30,390 = 4,21,010

Other Expenses and Losses

Write-off of inventory due to obsolescence ......................... $82,650

Casualty loss ...................................................................... 48,400

1,31,050

Income before income tax = 4,21,010 - 1,31,050 = 2,89,960

Income Tax ......................................................... = 98586.4

Net Income ........................................................... $ 1,91,373.6

Retained Earnings Statement

Retained earnings at December 31, 2016 ........................... $ 1,000,870

Correction for overstatement of net income in prior period

(depreciation error) (net of $ 28,101 tax) ............................. 54,549

Retained earnings, Jan. 1, as adjusted ................................ $ 9,46,321

Net income ......................................................................... 1,91,373.6

$ 11,37,694.6

Dividends declared ................................................................ 62,660

Retained earnings, Dec. 31 .................................................... $ 1075034.6