Question

Larkspur Inc., a private company, is authorized to issue an unlimited number of common shares and 260,000 noncumulative $6 preferred shares. It began operations on January 1, 2021, and the following are selected transactions during 2021.

Jan.	1		Issued 200,000 common shares for $100,000 cash.
	2		Issued 20,000 preferred shares for $30 cash per share.
Dec.	1		Declared a total of $228,400 in dividends, payable on January 5, to shareholders of record on December 13.
	31		Determined that it had total revenues of $929,000 and operating expenses of $620,000.

Larkspur elected to report under ASPE. It has a 15% income tax rate and paid income tax instalments during the year of $41,350.

Prepare a partial income statement starting with profit before income tax and record an adjusting entry for income tax. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

LARKSPUR INC. Income Statement (Partial)                                                                       Quarter Ended December 31, 2021December 31, 2021Year Ended December 31, 2021
InvestmentsCommon Share DividendsOther ExpensesRetained Earnings, January 1Gross ProfitProfit Before Income TaxProfit/(Loss)Operating ExpensesRetained Earnings, December 31Preferred Share Dividends		$
InvestmentsProfit/(Loss)Retained Earnings, December 31Gross ProfitCommon Share DividendsPreferred Share DividendsRetained Earnings, January 1Operating ExpensesOther ExpensesProfit Before Income Tax		$

Date	Account Titles and Explanation	Debit	Credit
Dec. 31
	(To record income tax expense.)

  

  

Question Part Score

--/2

Prepare a statement of retained earnings. (List items that increase retained earnings first.)

LARKSPUR INC. Statement of Retained Earnings                                                                       December 31, 2021Quarter Ended December 31, 2021Year Ended December 31, 2021
Retained Earnings, December 31Gross ProfitProfit Before Income TaxProfit/(Loss)Preferred Share DividendsCommon Share DividendsRetained Earnings, January 1Other ExpensesOperating ExpensesInvestments		$
AddLess:                                                                       InvestmentsProfit/(Loss)Operating ExpensesPreferred Share DividendsGross ProfitRetained Earnings, January 1Other ExpensesRetained Earnings, December 31Common Share DividendsProfit Before Income Tax
AddLess:
Retained Earnings, December 31Preferred Share DividendsOther ExpensesProfit/(Loss)Retained Earnings, January 1Common Share DividendsProfit Before Income TaxOperating ExpensesGross ProfitInvestments	$
Profit Before Income TaxCommon Share DividendsInvestmentsProfit/(Loss)Operating ExpensesRetained Earnings, December 31Other ExpensesGross ProfitRetained Earnings, January 1Preferred Share Dividends
Gross ProfitRetained Earnings, December 31Profit/(Loss)InvestmentsProfit Before Income TaxOperating ExpensesCommon Share DividendsPreferred Share DividendsOther ExpensesRetained Earnings, January 1		$

  

  

Question Part Score

--/3

Prepare the shareholders’ equity section of the balance sheet.

LARKSPUR INC. Balance Sheet (Partial)                                                                       December 31, 2021Year Ended December 31, 2021Quarter Ended December 31, 2021
Total Shareholders' EquityTotal Current LiabilitiesTotal Property, Plant and EquipmentTotal Current AssetsTotal Liabilities and Shareholder's EquityTotal Intangible AssetsShort-Term InvestmentsProperty, Plant and EquipmentTotal LiabilitiesIntangible AssetsLong-Term InvestmentsTotal AssetsLong-Term DebtShare CapitalTotal Share CapitalCurrent AssetsCurrent LiabilitiesShareholders' Equity
Current LiabilitiesCurrent AssetsLong-Term DebtIntangible AssetsShare CapitalTotal LiabilitiesTotal Intangible AssetsShareholders' EquityShort-Term InvestmentsTotal Share CapitalProperty, Plant and EquipmentTotal Current LiabilitiesTotal Current AssetsTotal Property, Plant and EquipmentTotal Shareholders' EquityLong-Term InvestmentsTotal Liabilities and Shareholder's EquityTotal Assets
		$
Total Intangible AssetsTotal Liabilities and Shareholder's EquityShareholders' EquityCurrent AssetsTotal LiabilitiesTotal Current LiabilitiesShort-Term InvestmentsProperty, Plant and EquipmentLong-Term InvestmentsTotal AssetsLong-Term DebtTotal Property, Plant and EquipmentTotal Shareholders' EquityTotal Current AssetsTotal Share CapitalCurrent LiabilitiesShare CapitalIntangible Assets
Total Intangible AssetsShare CapitalTotal Liabilities and Shareholder's EquityTotal Current LiabilitiesTotal Share CapitalTotal Property, Plant and EquipmentShort-Term InvestmentsTotal Current AssetsLong-Term InvestmentsTotal Shareholders' EquityLong-Term DebtShareholders' EquityTotal LiabilitiesProperty, Plant and EquipmentCurrent LiabilitiesCurrent AssetsTotal AssetsIntangible Assets		$

  

Answer 1

Partial Income Statement - Larkspur Inc.
Total Revenue	$929,000.00
Less: Operating Expense	$620,000.00
Incoem Before Tax	$309,000.00
Less: Income Tax	$46,350.00
Net Income	$262,650.00
Statement of Retained Earning - Larkspur Inc.
Beginning Balance
Add: Net Income	$262,650.00
Less: Dividend	-$228,400.00
Endign Retained Earning Balance	$34,250.00
Stockholders' Equity Section-Larkspur Inc.
31-Dec-21
Paid in capital:
Common stock	100,000
Preferred stock	600,000
Total paid in capital	700,000
Retained earnings	34,250
Total stockholders equity	$734,250