Question

A list of Year 3 revenues and expenses for Green Thumb, Inc. is provided below. Advertising and Promotion Expenses 262,700 Income Tax Expense 56,520 Interest Expense 43,920 Other Expenses 122,600 Other Selling & Administrative Expenses 351,000 Sales Revenue 1,866,300Salaries and Wages Expense 725,000 (a) Calculate the net income for the Green Thumb, Inc. for Year 3. (b) Prepare a statement of retained earnings for Green Thumb, Inc. for Year 3. Assume the company had retained earnings of $162,200 as of January 1, Year 3, and paid out $46,020 in dividends during Year 3.

Answer 1

Answer:

A. Net Income = $304,560

B. Ending Retained Earnings = $420,740

Explanation:

Req. (A)

Green Thumb, Inc.

Income Statement

For the year ended, 31 December, 20Y3

Revenues:

Sales Revenues $1,866,300

Expenses:

Salaries and wages expenses $725,000

Advertising and Promotion Expenses 262,700

Income Tax Expense 56,520

Interest Expense 43,920

Other Expenses 122,600

Other Selling & Administrative Expenses 351,000

Total Expenses = ($1,561,740)

Net Income = $304,560

Note: We can use a multiple step income statement. However, as there is no instruction, we use single step income statement.

Req. (B)

Green Thumb, Inc.

Statement of Retained Earnings

For the year ended, 31 December, 20Y3

Balances, January 1 $162,200

Add:

Net income for the current year $304,560

Less: Dividends ($46,020)

Balances, December 31 $420,740

Note: Here, Balances, January 1 = Beginning Retained earnings Balance

Balances, 31 December = Ending retained earnings.