1. Financial Statement Preparation: A Tutorial Prepared by – Dr. Angela H. Sandberg Professor of Accounting – Jacksonville State University

7. The Income Statement

28. The Statement of Retained Earnings

30. Statement of Retained Earnings The format of the statement is:

31. Statement of Retained Earnings The format of the statement is: Beg. balance, retained earnings + Net income - Dividends End. balance, retained earnings

34. The Balance Sheet

60. Income Statement Net income Statement of Retained Earnings Beginning Retained Earnings + Net income – Dividends Ending retained earnings Balance Sheet Ending Balance Retained Earnings Order of Preparation

62. Example Problem 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

64. Assets 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

65. Assets, Liabilities, 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

66. Assets, Liabilities, Equity 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

67. Assets, Liabilities, Equity, Revenues 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

68. Assets, Liabilities, Equity, Revenues, Expenses 3,000 Supplies Expense 40,000 Bonds Payable 58,000 Cost of Goods Sold 4,000 Supplies 20,000 Additional Paid in Capital 5,000 Interest Expense 10,000 Accounts Receivable 16,000 Salaries Expense 30% Income Tax Rate 5,000 (beg. bal.) Retained Earnings 45,000 Inventories 12,000 Accounts Payable 45,000 Common Stock 65,000 Buildings 8,000 Utility Expense 100,000 Sales 5,000 Cash

70. Income Statement -5,000 - Non-operating Items -27,000 - Operating Expenses 15,000 Income from Operations 10,000 Income before Taxes 7,000 Net Income -3,000 - Income Taxes 42,000 Gross Margin -58,000 - Cost of Goods Sold 100,000 Sales

71. Income Statement Operating expenses include: Utility expense 8,000 Salaries expense 16,000 Supplies expense 3,000 -5,000 - Non-operating Items -27,000 - Operating Expenses 15,000 Income from Operations 10,000 Income before Taxes 7,000 Net Income -3,000 - Income Taxes 42,000 Gross Margin -58,000 - Cost of Goods Sold 100,000 Sales

72. Income Statement Non-operating items include: Interest expense 5,000 -5,000 - Non-operating Items -27,000 - Operating Expenses 15,000 Income from Operations 10,000 Income before Taxes 7,000 Net Income -3,000 - Income Taxes 42,000 Gross Margin -58,000 - Cost of Goods Sold 100,000 Sales

73. Income Statement Income taxes = Income before taxes * Income tax rate 10,000 * 30% = 3,000 -5,000 - Non-operating Items -27,000 - Operating Expenses 15,000 Income from Operations 10,000 Income before Taxes 7,000 Net Income -3,000 - Income Taxes 42,000 Gross Margin -58,000 - Cost of Goods Sold 100,000 Sales

75. Statement of Retained Earnings Net Income is brought forward from the Income Statement. 12,000 Ending Balance, Retained Earnings -0 - Dividends +7,000 + Net Income 5,000 Beginning Balance, Retained Earnings

77. Balance Sheet 45,000 Common Stock Non-Current Assets: 40,000 Bonds Payable 45,000 Inventories Stockholders’ Equity: 4,000 Supplies 20,000 Additional Paid in Capital 65,000 Buildings 129,000 Total Liabilities and Equity 129,000 Total Assets 12,000 Retained Earnings Long-term liabilities: 10,000 Accounts Receivable 12,000 Accounts Payable 5,000 Cash Current Liabilities: Current Assets:

78. Balance Sheet End. Bal. is brought forward from the Statement of Retained Earnings 45,000 Common Stock Non-Current Assets: 40,000 Bonds Payable 45,000 Inventories Stockholders’ Equity: 4,000 Supplies 20,000 Additional Paid in Capital 65,000 Buildings 129,000 Total Liabilities and Equity 129,000 Total Assets 12,000 Retained Earnings Long-term liabilities: 10,000 Accounts Receivable 12,000 Accounts Payable 5,000 Cash Current Liabilities: Current Assets:

79. The End