NAME : NAJEEBULLAH

ID : 10369

ASSIGNMENT : Financial statement of

corporation

SUBMITTED : RIAZ AHMED

Q.1 The following data is related to the Radiance Software company operations during 2011.

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Continuing operations:

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ………….. $19,860,000

Costs and other expenses………………………………….... . . . . . . . . . . . . . . . ……...16,901,000

Other data:

Operating income during 2011……………………………………………………………..141,000

Loss on disposal of discontinued segment………………………………………………….551,000

Extraordinary loss (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . …………….. . . . 901,000

Prior period adjustment (increase in 2010 depreciation

expense, net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . ………………... . 351,000

Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ……………… . . . . 951,000”

Instructions

a. For the period of 2011 prepare the summarized income statement, including the figures of earning
per share. The Radiance software company has “19000 shares $1 par value of common stock and has
70000 share of $6.25, $100 par value preferred stock shares are outstanding all over the year.”

b. From the above data also prepared the retained earnings statement for the ended year 31,
December, 2011. By means of originally recorded, retained earnings at 31 December, 2010, that is
amounted to $7,285,000.

PART A

Radiance software company

Summarized Income Statement

For the year 2011

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Income from continuing operation 275000

Cost and Expenses

Less: Loss from 1,00,000

Income before Income tax 175000

Less:Income tax expense 70,000

Net Income 105000

PART B

Radiance software company

Retained Earning Statement

For 31 december 2011

Retained earning at the beginning 7285000

Add: Net Income 105000

Total retain earning 7390000

Less: Dividends ( 951,000)

Retained earning at the end 6439000”

Q.2 The total assets of the Shah Taj company $140,000 and the total liabilities are $84,000.
Then, what is the retained earnings of Shah Taj company if the capital stock is $50,000?

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Assets $140,000

Liabilities $84000

Capital $50000

Stock holder’s equity : Assets - Liabilities

Stock holder’s equity= $140,000 - $84000

= $ 56000

We know that

Equity = Capital stock +retained earning

Retained earning = Equity - Capital stock

Retained earning = $56000 - $50000

Retained earnings = $ 6000.

Q.3 How do the statement of owner’s equity is calculated?

A Statement of Owner's Equity;

A Statement of Owner's Equity (SOE) shows the owner's capital at the start of the period,he changes
that affect capital, and the resulting capital at the end of the period. It is also known as "Statement of
Changes in Owner's Equity".

How to calculate SOE:

First put a three line heading

The first line shows the name of the company; second the title of the report; and third the period
covered.

Then add CAPITAL account in the beginning

Add additional contribution

Add net Income

Less Drawings made

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And You will have a capital by the end of the time period.

ABC CORPORATION

STATEMENT OF STOCK HOLDER”S EQUITY

FOR THE YEAR ENDED ***

Capital – beginning $5,000

Add:Additional Contributions $1,000

Net Income $2,000

Total$ $8,000

Less: Drawings $2,000

Capital – ending$ $6,000

Q.4 The ABC INC, has $5000 capital at the opening period. The owner, Chen has added $1000
cash to paid in capital and earned from the sales $2000. The business owner has also
withdrawn the $2000 for the payment of the personal expenses. The statement of owner’s
equity resulting has shown an ending balance of capital $6000. Ending balance of equity will
be carry forward to the following period and will become the opening balance .

Requirement:

Prepare the statement of owner’s equity.

Data:
Capital = $5,000

Contributions = $1,000

Net Income = $2,000

Drawing = $2,000

Ending Balance = $6,000

ABC INC, Company

Statement of Owner’s Equity
For the year ended XXX

Chen, Capital $5,000

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 Additional contributions $1,000
Net Income $2,000
$3,000
Less Withdrawals $2,000
Increase in Owner’s Equity $1,000
Chen, Capital $6,000

Q.6 Wolfa Company has outstanding two classes of $100 par value stock: 5000 shares of
8%cumulative preferred and 25,000 shares of common. The company had a $50,000 retained
earnings at the beginning of the current year, and preferred dividends had not been paid for
two years. During the current year, the company earned $300,000. What will be the balance
in retained earnings at the end of the current year, if the company pays a dividend of $2 per
share on the common stock?

Data:

Common Stock: 25,000 shares (2$ per share)

Preferred Stock: 5000 shares ($100 par value)

Retained Earnings: $50,000

Net Income: $300,000

Solution:

16% cumulative preferred dividend = 5,000 * 100 * 16%

= $80,000

Common Stock Dividend = 25,000 shares * 2

= $50,000

Retained Earnings = Previous year retained earning + net income – preferred dividend – commons stock
dividend

= 50,000 + 300,000 – 80,000 – 50,000

= $220,000

Therefore, at the end of the year the balance in retained earnings will be $220,000.

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