Income Statement and Retained Earnings Statement
Macaroon Corporation's Capital Structure

question 85

Essay

Income statement and retained earnings statement
Macaroon Corporation's capital structure consists of 20,000 common shares. At December 31, 2020 an analysis of the accounts and discussions with company officials revealed the following information:
$\begin{array}{c}\begin{array}{lll} \text {Sales..............................................................................................}\\ \text {Purchase discounts........................................................................}\\ \text {Purchases.....................................................................................}\\ \text {Earthquake loss (net of \( \$ 18,000 \) tax)...........................................}\\ \text {Selling expenses...........................................................................}\\ \text {Cash...........................................................................................}\\ \text {Accounts receivable..................................................................}\\ \text {Common shares........................................................................}\\ \text {Accumulated depreciation.......................................................}\\ \text {Dividend revenue.....................................................................}\\ \text {Inventory, January 1, 2020.......................................................}\\ \text {Inventory, December 31, 2020 .................................................}\\ \text {Unearned service revenue.......................................................}\\ \text {Accrued interest payable.......................................................}\\ \text {Land......................................................................................}\\ \text {Patents..................................................................................}\\ \text {Retained earnings, January 1, 2020.........................................}\\ \text {Interest expense.....................................................................}\\ \text {Cumulative effect of change from straight-line to accelerated}\\ \text {depreciation (net of \( \$ 15,000 \) tax)...........................................}\\ \text {General and administrative expenses....................................}\\ \text {Dividends declared...............................................................}\\ \text {Allowance for doubtful accounts ..........................................}\\ \text {Notes payable (maturity July 1, 2023)..................................}\\ \text {Machinery and equipment...................................................}\\ \text {Materials and supplies..........................................................}\\ \text {Accounts payable.................................................................}\end{array}\begin{array}{r}\$ 1,200,000 \\18,000 \\720,000 \\42,000 \\128,000 \\60,000 \\90,000 \\200,000 \\180,000 \\18,000 \\152,000 \\125,000 \\4,400 \\1,000 \\370,000 \\100,000 \\270,000 \\17,000 \\\\35,000 \\160,000 \\29,000 \\5,000 \\200,000 \\450,000 \\40,000 \\60,000\end{array}\end{array}$

Unless indicated otherwise, you may assume a 30% income tax rate.
Instructions
a) Prepare, in good form, a multiple-step income statement.
b) Prepare, in good form, a retained earnings statement.

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Definitions:

Political Risk

The risk of loss due to political instability or changes in government policy that can affect investments and business operations.