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Prepare a statement of retained earnings

    Assignment Instructions

    Assignment ID: FG133136107

    Question – PART 1 – Tamarisk Inc. has recorded all necessary adjusting entries, except for income tax expense, at its fiscal year end, July 31, 2021. The following information has been taken from the adjusted trial balance:

    Accounts payable


    Interest expense


    Cash dividends-common


    Notes payable


    Common shares


    Retained earnings (Aug. 1, 2020)


    Cost of goods sold


    Salaries expense


    Dividends payable




    Income tax expense


    Supplies expense


    Income tax payable


    Unearned revenue


    All accounts have normal balances and total assets equal $803,000. Tamarisk has a 20% income tax rate.

    Prepare a multiple-step income statement.

    Prepare required journal entry to adjust income tax expense.

    PART 2 – Sheridan Ltd. has a September 30 fiscal year end and a 15% income tax rate. The following information is available for its 2021 year end:

    1. Earned $490,000 of service revenue and incurred $406,500 of operating expenses. Interest expense was $3,900.

    2. On October 5, 2020, paid $50,000 of dividends that had been declared on September 25, 2020.

    3. On September 28, 2021, declared $40,000 of dividends payable on October 8, 2021.

    4. Retained earnings on September 30, 2020, were $250,000.

    5. Issued common shares for $23,500 cash on July 2, 2021.

    Prepare an income statement.

    Journalize the adjustment for income tax assuming no income tax instalments were made during the year.

    Prepare a statement of retained earnings.

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