The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:Cash $ 240,000Accounts receivable 966,000Inventory 1,690,000Estimated returns inventory 22,500Office supplies 13,500Prepaid insurance 8,000Office equipment 830,000Accumulated depreciation-office equipment 550,000Store equipment 3,600,000Accumulated depreciation-store equipment 1,820,000Accounts payable 326,000Customer refunds payable 40,000Salaries payable 41,500Note payable (final payment due 2024) 300,000Common stock 500,000Retained earnings 2,949,100Dividends 100,000Sales 11,343,000Cost of goods sold 7,850,000Sales salaries expense 916,000Advertising expense 550,000Depreciation expense-store equipment 140,000Miscellaneous selling expense 38,000Office salaries expense 650,000Rent expense 94,000Depreciation expense-office equipment 50,000Insurance expense 48,000Office supplies expense 28,100Miscellaneous administrative expense 14,500Interest expense 21,0001. Prepare a retained earnings statement. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Negative amount should be indicated by the minus sign. A colon (:) will automatically appear if it is required.2. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

1. Prepare a retained earnings statement.

Net income = $943,400

Retained earning at May 31, 2018 = $3,792,500

2. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

Net Total Assets = Stockholder's equity = $4,292,500

Explanation:

1. Prepare a retained earnings statement.

To do this, the income statement is first prepared to obtain the net income as follows:

Clairemont Co.

Income Statement

for the fiscal year ended May 31, 2018

Details                                                         $            

Sales                                                   11,343,000

Cost of goods sold                           (7,850,000)

Gross Income                                      3,493,000

Selling and Distribution expenses:

Sales salaries expense                        (916,000)

Advertising expense                           (550,000)

Dep. expense - Store equipment        (140,000)

Miscellaneous selling expense            (38,000)

Administrative expenses:

Office salaries expense                     (650,000)

Rent expense                                        (94,000)

Insurance expense                               (48,000)

Dep. exp - Office equipment               (50,000)

Office supplies expense                       (28,100)

Miscellaneous admin expense             (14,500)  

Operating income                                964,400

Interest expense                                   (21,000)

Net income                                          943,400

The retained earning statement can therefore, be stated as follows:

Clairemont Co.

Retained Earnings Statement

for the fiscal year ended May 31, 2018

Details                                                             $            

Retained earnings at June 1, 2017         2,949,100

Net income for the year                            943,400

Dividends                                                  (100,000)

Retained earning at May 31, 2018       3,792,500  

2. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

Clairemont Co.

Balance sheet

for the fiscal year ended May 31, 2018

Details                                                     $                         $      

Fixed Assets

Office equipment                             830,000

Accumulated dep.- office equip   (550,000)            280,000      

Store equipment                            3,600,000

Accumulated dep.- store equip    (1,820,000)         1,780,000

Net Fixed Assets                                                        2,060,000

Current Assets

Cash                                                    240,000

Accounts receivable                          966,000

Inventory                                           1,690,000

Estimated returns inventory                 22,500

Office supplies                                       13,500

Prepaid insurance                                   8,000  

Total current assets                         2,940,000

Current Liabilities

Accounts payable                               (326,000)

Customer refunds payable                   (40,000)

Salaries payable                                     (41,500)

Note payable                                         (50,000)

Working Capital                                                               2,482,500

Long-term Liability

Note payable (300,000 - 50,000)                                 (250,000)

Net Total Assets                                                            4,292,500

Financed by:

Common stock                                                                 500,000

Retained earning at May 31, 2018                                 3,792,500  

Stockholder's Equity                                                     4,292,500

Note:

Since both the Net Total Assets and Stockholder's equity are to $4,292,500, it implies the financial statement is accurately prepared as both as always be equal.

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