Reference no: EM13482332
The Schultz Company prepares interim financial statements at the end of each quarter. The income statement presented at the end of the first quarter of 2010 is as follows:
Sales (net) $ 40,000
Cost of goods sold (23,000)
Gross profit $17,000
Operating expenses
Selling expenses $8,800
Administrative expenses 4,210
Total operating expenses (13,010)
Pretax operating income $ 3,990
Other items
Interest revenue $ 40
Rent revenue 300
Interest expense (330) 10
Income before income taxes $ 4,000
Income tax expense (700)
Net income $ 3,300
Earnings per share (8,000 shares) $0 .41
Shown next is the Schultz Company trial balance as of June 30, 2010
Debit Credit
Cash $ 7,200
Accounts receivable (net) 10,300
Note receivable (due 9/1/10 4,000
Inventory 24,400
Prepaid insurance &nbsõbpx.Hmbsp; 960
Property and equipment 80,000
Accumulated depreciation $ 20,000
Accounts payable 8,000
Dividends payable 3,200
Unearned rent 1,800
Bonds payable 10% (due 1/1/2015) 12,000
Discount on bonds payable 600
Common stock, $ 1 par 8,000
Premium on common stock 34,580
Retained earnings 26,400
Sales (net) 90,000
Cost of goods sold 48,600
Selling expenses 19,700
Administrative expenses 8,170
$203,980 $203,980
Additional information;
1. The company uses a perpetual inventory system.
2. The company uses control accounts for selling and administrative expenses.
3. The company journalizes and posts its adjusting entries to its accounts only at year-end.
4. Uncollectible accounts average 0.5% of net sales.
5. The $4,000 note receivable was received on March 1, 2010. The 6-month note carries an annual interest rate of 12%, the interest to be collected at the maturity date.
6. The balance in the Prepaid Insurance account represents payment made on January 1, 2010 for a one year comprehensive insurance policy.
7. The property and Equipment account consists of Land $5,000; buildings, $55,000; and equipment, $20,000. The buildings are being depreciated over a 25-year life; the equipment over an 8-year life. Straight-line depreciation is used; residual value is disregarded. No acquisitions have been made in 2010. The depreciation on the buildings is treated as an administrative expense; depreciation on the equipment as a selling expense.
8. On February 1, 2010, the company rented some floor space to another company, receiving one year's rent of $1,800 in advance.
9. The bonds pay interest semiannually on January 1 and July 1. Straight-line amortization of the discount is recorded at the end of each year.
10. The company estimates that its pretax income for the second half of 2010 will total $11,550. All items in income are subject to the same income tax rate schedule. The income tax rate schedule is 15% on the first $20,000 of taxable income and 30% on the excess. There is no difference between the company's pretax financial income and taxable income, and no tax credits are available. The company rounds its estimated effective income tax rate to the nearest tenth of a percent. Income taxes will be paid during the first quarter of 2011.
11. On June 29, 2010, the company had declared and recorded (directly in Retained Earnings)a semiannual dividend of 40c per share, payable on August 3, 2010.
12. The 8,000 shares of common stock have been outstanding the entire 6 months of 2010.
1. Prepare a 10-column worksheet to develop the Schultz Company financial statements for the first 6 months of 2010.
2. Prepare the income statement for (a) the first 6 months of 2010 and (b) the second quarter of 2010.
3. Prepare a retained earnings statement for the first 6 months of 2010.
4. Prepare the June 30, 2010 balance sheet.