Below are two questions from my accounting class. I am not sure how to approach this kind of problem. Any help or suggestions would be greatly appreciated.
Thanks in advance!
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The following trial balance of Trane Corp. at December 31, 2001 has
been properly adjusted except for the income tax expense adjustment.
Trane Corp.
Trial Balance
December 31, 2001
Dr. Cr.
___________ __________
Cash $ 875,000
Accounts receivable (net) 2,695,000
Inventory 2,085,000
Property, plant, and equipment (net) 7,366,000
Accounts payable and accrued liabilities $ 1,501,000
Income taxes payable 654,000
Deferred income tax liability 85,000
Common stock 2,350,000
Additional paid-in capital 3,680,000
Retained earnings, 1/1/01 3,650,000
Net sales and other revenues 13,360,000
Costs and expenses 11,080,000
Income tax expenses 1,179,000
___________ ___________
$25,280,000 $25,280,000
Other financial data for the year ended December 31, 2001:
Included in accounts receivable is $960,000 due from a
customer and payable in quarterly installments of $120,000. The last
payment is due December 29, 2003.
The balance in the Deferred Income Tax Liability account
pertains to a temporary difference that arose in a prior year, of
which $20,000 is classified as a current liability.
During the year, estimated tax payments of $425,000 for the year 2002
were charged to income tax expense.
In Trane's December 31, 2001 balance sheet,
14. The current assets total is
a. $6,080,000.
b. $5,655,000.
c. $5,535,000.
d. $5,175,000.
15. The final retained earnings balance is
a. $4,751,000.
b. $4,836,000.
c. $5,176,000.
d. $5,105,000.
To determine the current assets total in Trane Corp.'s December 31, 2001 balance sheet (Question 14), we need to identify the current assets listed in the trial balance and make any necessary adjustments based on the additional financial data provided.
First, let's identify the current assets listed in the trial balance:
1. Cash: $875,000
2. Accounts receivable (net): $2,695,000
3. Inventory: $2,085,000
From the additional financial data, we also need to consider the $960,000 due from a customer, which is included in accounts receivable.
Therefore, the adjusted current assets total is:
$875,000 (cash) + $2,695,000 (accounts receivable) + $960,000 (due from customer) + $2,085,000 (inventory) = $6,615,000
Therefore, the correct answer for Question 14 is:
a. $6,080,000.
Now let's move on to Question 15.
To determine the final retained earnings balance in Trane Corp.'s December 31, 2001 balance sheet (Question 15), we need to consider the beginning retained earnings, the net income or loss for the period, any dividends declared, and any adjustments for prior years.
Given the information provided, we know the following:
1. Beginning retained earnings (Retained earnings, 1/1/01): $3,650,000
2. Net sales and other revenues: $13,360,000
3. Costs and expenses: $11,080,000
4. Income tax expenses: $1,179,000
5. Estimated tax payments for the year 2002: $425,000
To calculate the net income, we subtract the costs and expenses, including the income tax expenses, from the net sales and other revenues:
Net income = Net sales and other revenues - Costs and expenses - Income tax expenses
Net income = $13,360,000 - $11,080,000 - $1,179,000
Net income = $2,101,000
To calculate the final retained earnings, we start with the beginning retained earnings and add the net income for the period, then subtract any dividends declared:
Final retained earnings = Beginning retained earnings + Net income - Dividends
Final retained earnings = $3,650,000 + $2,101,000 - 0 (since no dividends are mentioned)
Final retained earnings = $5,751,000
Therefore, the correct answer for Question 15 is:
a. $4,751,000.
I hope this helps you approach similar accounting problems in the future!