Income Statement
Income Statement for the year Ended 20****
Notes the accounts and explanations
The first item in developing a statement of income is to determine the total revenues for the company for the year. Therefore, we add the service fees together with other revenues, which in this case include rent revenues as follows:
Service fees +rent revenues = $475000+$5000 = $480,000
The next step is to determine the expenses for the year to enable a determination of the net profits. The total expenses for the year amounted to $415,000.
The difference between the total revenues and expenses yields the net profits for the year. The following calculation gives an insight into the profitability of Coopertown Suppliers, Inc for the just concluded year.
Net Profits = Revenues- Expenses. Therefore, profits are $480,000- $415,000 =$64,400.
Retained Earnings
Statement of Retained Earnings for the year Ended 20****
In determining the retained earnings for the year, it is critical to consider items such as net profits for the year, retained earnings, and dividends paid to the shareholders. The procedure involved in arriving at the net retained earnings for the year is to add the retained earnings for the preceding year with the current profit.
The dividends paid are subtracted from gross earnings to derive the net earnings for the year. Therefore, net Retained earnings for the year = Net Profit + Retained Earnings B/ f – Dividends Paid. Net Retained earnings for the year = $64,400 +$427,600-$25,000 = $467,000
Financial Position
Statement of Financial Position 20****
A statement of financial position lists the company’s assets and liabilities. The process of preparing a statement of financial position (balance sheet) involves the identification and adjustment of the net book values of assets. Since equipment was subject to depreciation, it is necessary to subtract the cumulative depreciation to derive the net book value. For instance, the net book value of equipment is a negative figure ($260,000- $269,900= -$9,900).
All the asset values are added to arrive at the net total assets for the company. Prepayments for the year are considered as short-term company assets which can be turned into cash values quickly (Gibson, 2011). Liabilities and other payables are added together with the company’s common stock and retained earnings. This value yields total capital and liabilities, which should tally with the net assets. It is critical that the figures should balance to determine the accuracy of the calculations and presentations (Gibson, 2011).
Reference
Gibson, C. H. (2011). Financial reporting and analysis: Using financial accounting Information. South-Western: Cengage Learning.