1 answer

Industrial Relations Ltd. offers mediation services for unionized companies. When there is a contract dispute between...

Question:

Industrial Relations Ltd. offers mediation services for unionized companies. When there is a contract dispute between a union and company management, often the two sides require an outside consultant to assist in the negotiations – Industrial Relations Ltd. fills this role. The following account balances relate to the company’s June 30, 2017 year-end financial statements: Accumulated depreciation - buildings $12,000 Travel expense $6,000 Wages expense 35,000 Retained earnings (July 1, 2016) 34,900 Equipment 7,000 Accumulated depreciation - equipment 1,500 Supplies 500 Supplies expense 3,500 Depreciation expense 2,500 Interest expense 3,000 Consulting revenue 88,000 Common shares (July 1, 2016) 100 Buildings 125,000 Mortgage payable 60,000 Cash 3,000 Accounts receivable 1,000 Dividends 6,000 Notes payable 5,000 Income tax expense 11,000 Accounts payable 2,000 Notes: • There were no common shares issued or repurchased during the year. • The current portion of the mortgage payable was $8,000. Required: a.) Prepare an income statement for the year ended June 30, 2017. b.) Prepare a statement of changes in equity for the year ended June 30, 2017. c.) Prepare a statement of financial position as at June 30, 2017.


Answers

a.

Industrial Relations Ltd.
Income Statement
For the year ended June 30, 2017
$ $
Consulting Revenue 88,000
Operating Expenses
Wages Expense 35,000
Travel Expense 6,000
Supplies Expense 3,500
Depreciation Expense 2,500 47,000
Income from Operations 41,000
Interest Expense 3,000
Income before Taxes 38,000
Income Tax Expense 11,000
Net Income 27,000

b.

Industrial Relations Ltd.
Statement of Changes in Equity
For the year ended June 30, 2017
Common Shares, July 1, 2016 $ 100
Retained Earnings, July 1, 2016 34,900
Total Equity, July 1, 2016 35,000
Net Income 27,000
Less: Dividends (6,000)
Total Equity, June 30, 2017 56,000

c.

Industrial Relations Ltd.
Statement of Financial Position
June 30, 2017
$ $
Cash 3,000
Accounts Receivable 1,000
Supplies 500
Total Current Assets 4,500
Equipment 7,000
Accumulated Depreciation: Equipment (1,500)
Equipment, net 5,500
Buildings 125,000
Accumulated Depreciation: Buildings (12,000)
Buildings, net 113,000
Property, plant and Equipment, net 118,500
Total Assets $ 123,000
Liabilities
Accounts Payable 2,000
Notes Payable 5,000
Mortgage Payable ( Current) 8,000
Total Current Liabilities 15,000
Long-term Liabilities
Mortgage Payable 52,000
Total Liabilities 67,000
Equity 56,000
Total Liabilities and Equity $ 123,000
.

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