The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May

Question

2 months ago

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The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May

31, 2018:Cash $ 240,000Accounts receivable 966,000Inventory 1,690,000Estimated returns inventory 22,500Office supplies 13,500Prepaid insurance 8,000Office equipment 830,000Accumulated depreciation-office equipment 550,000Store equipment 3,600,000Accumulated depreciation-store equipment 1,820,000Accounts payable 326,000Customer refunds payable 40,000Salaries payable 41,500Note payable (final payment due 2024) 300,000Common stock 500,000Retained earnings 2,949,100Dividends 100,000Sales 11,343,000Cost of goods sold 7,850,000Sales salaries expense 916,000Advertising expense 550,000Depreciation expense-store equipment 140,000Miscellaneous selling expense 38,000Office salaries expense 650,000Rent expense 94,000Depreciation expense-office equipment 50,000Insurance expense 48,000Office supplies expense 28,100Miscellaneous administrative expense 14,500Interest expense 21,0001. Prepare a retained earnings statement. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Negative amount should be indicated by the minus sign. A colon (:) will automatically appear if it is required.2. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

Business

1 answer:

soldi70 [3.6K] · Answer 1 · 2026-03-09T14:08:17+03:00

Answer:

1. Create a statement for retained earnings.

Net income = $943,400

Retained earnings as of May 31, 2018 = $3,792,500

2. Construct a balance sheet, assuming a current portion of the note payable is $50,000.

Total Net Assets = Stockholder’s equity = $4,292,500

Explanation:

1. Create a statement for retained earnings.

The first step is preparing the income statement to find the net income as shown below:

Clairemont Co.

Income Statement

for the fiscal year ended May 31, 2018

Details $

Sales 11,343,000

Cost of goods sold (7,850,000)

Gross Income 3,493,000

Selling and Distribution expenses:

Sales salaries expense (916,000)

Advertising expense (550,000)

Depreciation expense - Store equipment (140,000)

Miscellaneous selling expense (38,000)

Administrative expenses:

Office salaries expense (650,000)

Rent expense (94,000)

Insurance expense (48,000)

Depreciation expense - Office equipment (50,000)

Office supplies expense (28,100)

Miscellaneous administrative expense (14,500)

Operating income 964,400

Interest expense (21,000)

Net income 943,400

Clairemont Co.

Retained Earnings Statement

for the fiscal year ended May 31, 2018

Details $

Retained earnings at June 1, 2017 2,949,100

Net income for the year 943,400

Dividends (100,000)

Retained earnings at May 31, 2018 3,792,500

2. Construct a balance sheet, assuming a current portion of the note payable is $50,000.

Clairemont Co.

Balance sheet

for the fiscal year ended May 31, 2018

Details $ $

Fixed Assets

Office equipment 830,000

Accumulated depreciation - office equip (550,000) 280,000

Store equipment 3,600,000

Accumulated depreciation - store equip (1,820,000) 1,780,000

Net Fixed Assets 2,060,000

Current Assets

Cash 240,000

Accounts receivable 966,000

Inventory 1,690,000

Estimated returns inventory 22,500

Office supplies 13,500

Prepaid insurance 8,000

Total current assets 2,940,000

Current Liabilities

Accounts payable (326,000)

Customer refunds payable (40,000)

Salaries payable (41,500)

Note payable (50,000)

Working Capital 2,482,500

Long-term Liability

Note payable (300,000 - 50,000) (250,000)

Net Total Assets 4,292,500

Financed by:

Common stock 500,000

Retained earnings at May 31, 2018 3,792,500

Stockholder’s Equity 4,292,500

Note:

Since both the Total Net Assets and Stockholder’s equity are equal at $4,292,500, this indicates the financial statement is correctly prepared as both values are meant to coincide.

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