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Question $1$

Using the following information for Company A$.$

a$)$ Create an income statement. Company A$.$

b$)$ Create a statement of retained earnings. Income Statement

Operating expenses $$250,000$ Sales revenue

Dividends $$78,000$ less Sales discount

Sales revenue $$800,000$ Net sales

Operating income from discontinued operations $$8,700$ less Cost of goods sold

Loss on sale of assets $$5,000$ Gross profit

Correction to prior year $($debit$)$ $$1,200$ Less Operating expenses

Opening retained earnings $$45,800$ Income from operations

Sales discount $$20,000$ Other Income $($expenses$)$

Loss due to lawsuit $$50,000$ Loss due to lawsuit

Income tax expense on discontinuing operations $$2,610$ Loss on sale of assets

Income tax expense on continuing operations $$17,500$ Income before taxes and discontinued operations

Cost of goods sold $$300,000$ Income tax expense on continuing operations

Income before discontinued operations

Discontinued operations

Operating income from discontinued operations

less Income tax expense on discontinuing operations

NET INCOME

Statement of Retained Earning

Company A$.$

Opening retained earnings

Correction to prior year $($debit$)$

Net income

Dividends

Closing retained earnings

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