Little Tots Ltd. sells children's clothing. At the end of December 2011 (its first year of operations), it had the following account balances:
Accounts receivable…………………………………..$ 2,500
Rent expense…………………………………………. 3,600
Cash…………………………………..……………… 3,500
Wages payable……………………………………...... 400
Display counters and other store fixtures……………. 5,500
Accumulated depreciation…………………………… 500
Depreciation expense………………………………... 500
Wages expense………………………………………. 26,000
Prepaid rent………………………………………….. 300
Cost of goods sold…………………………………... 34,900
Sales revenue………………………………………… 69,900
Bank loan (due in two years)………………………... 4,800
Advertising expense………………………………… 800
Accounts payable…………………………………… 2,000
Electricity expense………………………………….. 300
Dividends declared…………………………………. 1,200
Share capital………………………………………… 10,000
Interest paid on bank loan…………………………... 100
Inventory……………………………………………. 8,000
Other expenses……………………………………… 400
Retained earnings…………………………………… ?
Required:
a. Calculate the net earnings for the year, by adding the revenue and deducting all the expenses.
b. Calculate the retained earnings, by following the process outlined below:
Balance in retained earnings at the beginning of the year…………………$ 0*
Add: Net earnings for the year……………………………………………. ?
Deduct: Dividends declared during the year………………………………
Balance in retained earnings at the end of the year……………………….. ?
*The beginning balance is zero because this was the company's first year of operations,
c. Prepare a classified statement of financial position.