Instructions

1. a) Prepare, in good form, a multiple-step income statement.

2. b) Prepare, in good form, a retained earnings statement.

Macaroon Corporation's capital structure consists of 20,000 common shares. At December 31, 2017 an analysis of the accounts and discussions with company officials revealed the following information: Sales .......... $1,200,000 Purchase discounts ..... 18,000 Purchases .............. 720,000 Earthquake loss (net of $18,000 tax) 42,000 Selling expenses ...... 128,000 Cash............ 60,000 Accounts receivable ........ 90,000 Common shares....... 200,000 Accumulated depreciation 180,000 Dividend revenue ....... 18,000 Inventory, January 1, 2017 152,000 Inventory, December 31, 2017 125,000 Unearned service revenue 4,400 Accrued interest payable 1,000 Land.......... 370,000 Patents........ 100,000 Retained earnings, January 1, 2017. 270,000 Interest expense....... 17,000 Cumulative effect of change from straight-line to accelerated depreciation (net of $15,000 tax). 35,000 General and administrative expenses..... 160,000 Dividends declared............ 29,000 Allowance for doubtful accounts. 5,000 Notes payable (maturity July 1, 2020)..... 200,000 Machinery and equipment 450,000 Materials and supplies........ 40,000 Accounts payable.. 60,000 Unless indicated otherwise, you may assume a 30% income tax rate