Question

LO 34 E1-33B. (Learning Objectives 3, 4: Using the accounting equation; preparing a Balance Sheet) Amounts of the assets and liabilities of Bobbyboy Company, as of May 31, 20X6, are given as follows. Also included are revenue and expense figures for the year ended on that date (amounts in millions): Total revenue Receivables........ Current liabilities Share capital............ Interest expense.. Salary and other employee expenses..... Long-term liabilities ....... €34.0 0.2 6.0 15.9 0.2 15.5 2.3 Investments Property and equipment, net ........ Other expenses..... Retained earnings, beginning..... Retained earnings, ending Cash............ Other assets.. €16.1 18.0 6.8 9.3 ? 2.5 5.0 LO 3/4 Requirement 1. Prepare the Balance Sheet of Bobbyboy Company at May 31, 20X6. Use the accounting equation to compute ending retained earnings. E1-34B. (Learning Objective 3, 4: Preparing an Income Statement and a Statement of Changes in Equity) This exercise should be used with Exercise 1-33B. Requirements 1. Prepare the Income Statement of Bobbyboy Company, for the year ended May 31, 20X6. 2. What amount of dividends did Bobbyboy declare during the year ended May 31, 20X6? Hint: Prepare a statement of changes in equity.

Answer 1

(1)

Bobbyboy Company
Balance sheet
as on 31 May 20X6
Particular	Amount	Amount
Assets:
property pland and equipment	18
investment	16.1
Total Non current assets		34.1
receivables	0.2
cash	2.5
other assets	5
total current assets		7.7
Total Assets		41.8
Liability and shareholder equity
Liabilities
Long term liabilities	2.3
current liability	6
Total Liability		8.3
Shareholder equity:
Share capital	15.9
retained earning	x	15.9+x
Liability and shareholder equity		24.2+x

Accounting equation is assets = liabilities and shareholder equity

41.8=24.2+x

x= 41.8-24.2 which is 17.6

hence closing balance of retained earning is 17.6.

Hence the balance sheet is

Bobbyboy Company
Balance sheet
as on 31 May 20X6
Particular	Amount	Amount
Assets:
property pland and equipment	18
investment	16.1
Total Non current assets		34.1
receivables	0.2
cash	2.5
other assets	5
total current assets		7.7
Total Assets		41.8
Liability and shareholder equity
Liabilities
Long term liabilities	2.3
current liability	6
Total Liability		8.3
Shareholder equity:
Share capital	15.9
retained earning	17.6	33.5
Liability and shareholder equity		41.8

(1.)

Income statement
as on 31 May 20X6
Particular	Amount	Amount
Total revenue		34
salary and other employee expense	15.5
Interest expense	0.2
other expense	6.8
total expenses		22.5
net profit		11.5

(2)

Statement of change in equity
as on 31 May 20X6
Particular	Amount	Amount
Share capital		15.9
openng balance of retained earning	9.3
add net profit	11.5
less dividend paid	3.2
closing balance of share capital		33.5