Question

A list of Year 3 revenues and expenses for Green Thumb, Inc. is provided below.

Advertising and Promotion Expenses $ 263,700
Income Tax Expense 56,620
Interest Expense 44,020
Other Expenses 123,600
Other Selling & Administrative Expenses 352,000
Sales Revenue 1,871,300
Salaries and Wages Expense 726,000
Required:
1. Calculate the net income for the Green Thumb, Inc. for Year 3.
2. Prepare a statement of retained earnings for Green Thumb, Inc. for Year 3. Assume the company had retained earnings of $163,200 as of January 1, Year 3, and paid out $46,120 in dividends during Year 3.

Answer 1

a. Green Thumb

Net Income for the year 3

Particulars Amount

Sales revenue $1,871,300

Operating expenses

Advertising expense $263,700

Salaries and wages expense $726,000

Other selling expenses $352,000

Other expenses $123,600 $1,465,300

Earnings before interest and taxes $406,000

Interest expense $44,020

Earnings before taxes $361,980

Income tax expense $56,620

Net Income $305,360

b. Green Thumb Inc.

Statement of retained earnings

For the year ended Dec 31, Year 3

Retained Earnings, Jan 1 year 3 $163,200

Add: Net Income $305,360

Less: Dividend paid $46,120

Retained Earnings, Dec 31 year 3 $422,440