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Chapter 5 - Ia3

The document contains 5 problems related to preparing statements of changes in equity and retained earnings for various companies. Problem 1 provides a statement of retained earnings for Reliable Company for 2021. Problem 2 provides a statement of retained earnings for Gondola Company for 2021 and details the calculation of adjusted net income. Problem 3 provides comparative income statements and statements of retained earnings for Angola Company for 2022 and 2021. Problem 4 provides a statement of changes in equity for Martha Company for 2021. Problem 5 provides a statement of changes in equity for Carr Company for 2021.

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182 views

Chapter 5 - Ia3

The document contains 5 problems related to preparing statements of changes in equity and retained earnings for various companies. Problem 1 provides a statement of retained earnings for Reliable Company for 2021. Problem 2 provides a statement of retained earnings for Gondola Company for 2021 and details the calculation of adjusted net income. Problem 3 provides comparative income statements and statements of retained earnings for Angola Company for 2022 and 2021. Problem 4 provides a statement of changes in equity for Martha Company for 2021. Problem 5 provides a statement of changes in equity for Carr Company for 2021.

Uploaded by

Xynith Nicole Ramos
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© © All Rights Reserved
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CHAPTER 5: STATEMENT OF CHANGES IN EQUITY

Problem 5-1
Required: Prepare a statement of retained earnings for 2021
RELIABLE COMPANY
Statement of Retained Earnings
Year ended, December 31, 2021

Retained earnings –unappropriated, Jan. 1 P 200,000


Correction of error – prior year overdepreciation 100,000
Change from FIFO to weighted average - credit 150,000
Correct beginning balance 450,000
Net Income 1,300,000
Retained earnings appropriated for treasury shares 200,000
Retained earnings appropriated for contingencies (100,000)
Cash dividends (500,000)
Retained earnings - December 31 P 1,350,000

Problem 5 – 2
Required: Prepare a statement of retained earnings for 2021
GONDOLA COMPANY
Statement of Retained Earnings
Year ended, December 31, 2021

Retained earnings - January 1 P 2,600,000


Correction of error:
Compensation of prior period not accrued (500,000)
Correction of prior period error - credit 400,000
Correct beginning balance 2,500,000
Net income 3,050,000
Loss on retirement of preference shares (350,000)
Share dividends (700,000)
Appropriation for treasury shares (1,000,000)
Retained earnings - December 31 P 3,500,000

Unadjusted Net Income P 3,000,000


Loss from fire (50,000)
Goodwill impairment (250,000)
Loss on sale of equipment (200,000)
Gain om early retirement of bonds payable 100,000
Gain on life insurance settlement 450,000
Adjusted net income P 3,050,000

Problem 5 – 3
Required: Prepare comparative statements of income and retained earnings
ANGOLA COMPANY
Comparative Income Statement
Year ended December 31, 2022 and 2021

2022 2021
Sales P 6,000,000 4,500,000
Cost of Goods Sold 2,900,000 2,300,000
Gross Income 3,100,000 2,200,000
Expenses 1,490,000 1,800,000
Net Income P 1,610,000 400,000

ANGOLA COMPANY
Comparative Statement of Retained earnings
Year ended December 31, 2022 and 2021

2022 2021
Retained Earnings, beg P 1,250,000 P 1,000,000
Net Income 1,610,000 400,000
Dividends paid (500,000) (150,000)
Retained earnings, end P 2,360,000 P 1,250,000

Problem 5 – 4
Required: Prepare a statement of changes in equity for the year ended December 31, 2021
MARTHA COMPANY
Statement of Changes in Equity
Year ended December 31, 2021

Ordinary Share Preference share Share Retained Treasury


capital capital premium Earnings shares
Balances, Jan. 1 10,000,000 7,500,000 3,250,000
Issuance of preference share 5,000,000 400,000
Reacquiring ordinary shares 320,000
Issuance of ordinary shares 2,500,000 3,500,000
Dividends – ordinary shares (2,480,000)
Retirement of treasury shares 50,000 (160,000)
Dividends – preference share (450,000)
Overstatement of prior period – (140,000)
ending inventory
Net income . . . 2,250,000 .
Balance – Dec. 31 12,500,000 5,000,000 11,450,000 2,430,000 160,000

Problem 5 – 5
Required: Prepare a statement of changes in equity for 2021
CARR COMPANY
Statement of Changes in Equity
Year ended December 31, 2021
Ordinary Share Preference share Share Retained Treasury
capital capital premium Earnings shares
Balances, Jan. 1 5,150,000 1,800,000 3,590,000 4,000,000 270,000
Retirement of treasury shares (150,000) (120,000) (270,000)
Property dividend (750,000)
Dividend - preference (180,000)
Overstatement of prior (350,000)
period income
Net Income . . . 2,600,000 .
Balance – Dec. 31 5,000,000 1,800,000 3,470,000 5,320,000 -

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