Reference no: EM133059496

Questions -

Q1. Presented below is information which relates to Cullumber Ltd., a Canadian private company.

Net loss	$126,000
Retained earnings, January 1, 2020	330,000
Cash dividends declared on common shares	50,000
Understatement of net income resulting from 2019 inventory error (pre-tax)	73,000

Prepare in good form, a statement of retained earnings for the year ended December 31, 2020. The tax rate is 30%.

Q2. The following are selected ledger accounts of Sheffield Rose Corporation at December 31, 2020:

Cash	$182,000	Entertainment expense	$72,000
Inventory (as of Jan. 1, 2020)	540,000	Office expense	35,000
Sales revenue	4,300,000	Insurance expense	23,000
Unearned revenue	120,000	Advertising expense	56,000
Purchases	2,710,000	Freight out	92,000
Sales discounts	33,000	Depreciation expense of office equipment	52,000
Purchase discounts	26,000	Depreciation expense of sales equipment	36,000
Salaries and wages expense (sales)	280,000	Telephone and Internet expense (sales)	18,000
Salaries and wages expense (administrative)	340,000	Utilities expense (administrative)	32,000
Purchase returns and allowances	12,000	Miscellaneous expense	8,000
Sales returns and allowances	80,000	Rental revenue	240,000
Freight in	73,000	Loss on disposal of equipment	88,000
Accounts receivable	145,000	Interest expense	156,000
Sales commission expense	84,000	Common shares	1,000,000

Sheffield's Rose effective tax rate on all items is 20%. A physical inventory indicates that the ending inventory is $ 690,000. The number of common shares outstanding is 100,000.

Prepare a condensed multi-step 2020 income statement for Sheffield Rose Corporation, showing expenses by function. Sheffield Rose follows ASPE but decides to disclose EPS on its income statement.

Q3. The financial records of Culver Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept the following statistical data related to the income statement:

1. The beginning merchandise inventory was $ 80,000 and it decreased by 20% during the current year.

2. There were 10,000 common shares outstanding for the entire year.

3. Interest expense was $ 25,000.

4. The income tax rate was 25%.

5. Cost of goods sold amounted to $ 440,000.

6. Administrative expenses were 20% of cost of goods sold but only 4% of gross sales.

7. Selling expenses were four fifths of cost of goods sold.

Prepare a single-step income statement for the year ended December 31, 2020, including calculation of EPS. Expenses should be shown by function.