Question

Question 4 (60 minutes, 23.5 marks) Today Ad Corp. is a company that provides advertising services to other companies. They have recently relocated in a new office building and, in the moving process, have lost most of their accounting documents. They were able to recover the adjusted trial balance at the end of December 31, 2016 (the current year) and the statement of cash flows prepared using the direct method that managers use internally. Debit Credit $ 117,000 80,000 4,000 400,000 $380,000 20,000 4,000 20,000 Adjusted trial balance at the end of December 31, 2016 Cash Accounts receivable Prepaid insurance Land Building Accumulated depreciation on building Office equipment Accumulated depreciation on office equipment FV-NI Investments Salaries payable Liability for customer lawsuit Employee bonus payable Income tax payable Common shares Bank loan (Town Bank) Building loan Retained earnings Advertising revenue Gain on sale of land Insurance expense Depreciation expense on building Salaries expense Loss from customer lawsuit Expense with employee bonus Income tax expense Interest expense Loss on FV-Nl investments Depreciation expense on office equipment Dividends 7,000 2.000 25,200 2,920 90,000 75,000 132,000 180,000 11,000 20,000 126,000 25,200 33,920 9,000 10,000 4,000 18,000

How to get RE of 54 880 and Net Income -59120 , highlighted above

Answer 1

Working notes is given below for Net loss and Retained Earnings

Income Statement for the year ended December 31, 2016 Advertising Revenue $180,000 Less: Expenses Salaries expenses $126,000 Expense with employees bonus $25,200 Depreciation expense on building $20,000 Depreciation expense on office equipment $4,000 Insurance expenses $11,000 Interest expense $9,000 Loss on FV-NI Investments $10,000 Income tax expense $33,920 $239,120 Net Income (Loss) -$59,120 Statement of Retained Earnings for the year ended December 31, 2016 Opening Balance $132,000 Net Loss during the year -$59,120 Dividend paid during the year -$18,000 $77,120 Closing balance of Retained earnings $54,880