PROBLEM ONE

Embassy Enterprises capital structure consists of 20,000 common shares. At December 31, 2023 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, 2023 152,000

Inventory, December 31, 2023 125,000

Unearned service revenue 4,400

Unrealized Gain, OCI 16,300

Accrued interest payable 1,000

Land 370,000

Patents 100,000

Retained earnings, January 1, 2023 270,000

Accumulated Other Comprehensive income, January, 1, 2023 .. 2,200

Interest expense 17,000

Depreciation not recorded in error in 2022 (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, 2026) 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.

Instructions

a) Prepare, in good form, a multiple-step statement of income and comprehensive income.

b) Prepare, in good form, a partial statement of changes in Equity. Include a column for retained earnings and accumulated other comprehensive income.