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Financial Accounting I – Unit V
BBA | BBA-BI | BBA-TT | BCIS 1st
PU 2018 Spring Q. No. 15
The Trial Balance of Trade House Ltd. is as follows:
Trial Balance 31 December, 2017
| Particulars | Debit (Rs.) | Credit (Rs.) |
| Cash and cash equivalents Account receivable Inventories of merchandise Prepaid expenses Furniture at cost Accumulated depreciation – furniture Brands, trademarks, and goodwill, net Other current assets Land Notes payable (due on April 2018) Accounts payable Accrued payroll Advance on sales (deferred revenue) Other current liabilities 10% Long-Term Debts Other non-current liabilities Preferred stock Common stock, Rs. 100 per share Retained earnings (December 31, 2016) Additional paid-in capital Net sales Cost of Goods Sold Sales commission Salaries of office staffs Depreciation expenses Interest expenses Advertisement expenses Gain on sale of furniture Income tax Cash dividends | 80,000 50,000 35,000 15,000 3,00,000 50,000 25,000 1,00,000 1,50,000 10,000 40,000 30,000 10,000 5,000 2,000 4,000 | 30,000 40,000 70,000 10,000 60,000 21,000 1,00,000 15,000 90,000 1,40,000 60,000 15,000 2,50,000 5,000 |
| Total | 9,06,000 | 9,06,000 |
Required:
a) Prepare multi-step Income Statement for he year ended 31, December 2017.
b) Prepare Classified Balance Sheet as on December 31, 2017.
Solution:
In the book of Trade House Ltd.
a.
Income statement (multi-step)
For the year ended 31 December, 2017
| Particulars | Amount Rs. |
| Net Sales Less: Cost of goods sold | 2,50,000 1,50,000 |
| Gross profit Less: Operating expenses A. General and administrative expenses Salaries of office staffs Depreciation expenses B. Selling and distribution expenses Sales commission Advertisement expenses Total Operating expenses (A + B) | 1,00,000 40,000 30,000 10,000 5,000 85,000 |
| Operating income Add: Non-operating incomes Gain on sale of furniture Less: Non-operating expenses Interest expenses | 15,000 5,000 10,000 |
| Income before tax Less: Income tax | 10,000 2,000 |
| Net income after tax | Rs. 8,000 |
Statement of Retained Earnings
| Particulars | Amount Rs. |
| Beginning balance of retained earnings Add: Net income | 60,000 8,000 |
| Earnings available Less: Dividend paid | 68,000 4,000 |
| Ending balance of retained earnings | Rs. 64,000 |
b.
Balance sheet (classified)
As on 31 December, 2017
| Assets | Amount Rs. |
| Current assets: Cash and cash equivalent Account receivable Inventories of merchandise Prepaid expenses Current assets | 80,000 50,000 35,000 15,000 25,000 |
| Investments | |
| Property, plant, and equipment Land Furniture Accumulated | 1,00,000 3,00,000 (30,000) |
| Intangible assets Brands, trademarks, and goodwill | 50,000 |
| Total aaets | Rs. 6,25,000 |
| Liabilities and stockholder’s equity | |
| Current liabilities: Accounts payable Accrued payroll Advance on sales Notes payable Other current liabilities | 70,000 10,000 60,000 40,000 21,000 |
| Long-term debt 10% long-term debt Other non-current liabilities | 1,00,000 15,000 |
| Stockholder’s equity Preferred stock Common stock Additional paid in capital Ending balance of retained earnings | 90,000 1,40,000 15,000 64,000 |
| Total liabilities and stockhlder’s equity | Rs. 6,25,000 |