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It is the end of a reporting period. Because there are more people than usual retiring this year, your manager has asked your accounting department to create 2 things:
- A process documentation detailing the different methods of preparing income statements, specific sections of the income statement, and how to handle the special types of income statement items
- Basic financial statements for your company
Individual Portion:
- Visit the SEC’s Web site (http://idea.sec.gov/idea/searchidea/companysearch_idea.html).
- Select a company filing of your choice that contains a multiple-step income statement.
- Communicate your selection with your group (each of you should submit a different company).
- Submit the link to this filing as proof of your research.
- Prepare a process documentation that
- is prepared in a professional manner because it will be the desktop guide used by others in the event of your absence to prepare the financial statements for Music Warehouse.
- is in the form of a memorandum or as a numbered listing of items, depending on your individual preference.
- includes the following elements:
- a definition and description of the specific sections of the income statement
- a description of the different methods of preparing income statements
- an explanation of the conceptual guidelines for reporting income
- how to handle the special types of income statement items
Please add your file.
Group Portion:
Using the information below, do the following:
- Prepare a multiple-step income statement for Music Warehouse.
- Prepare a statement of changes in stockholder’s equity for Music Warehouse.
You may work together, or you may assign each group member a different financial statement or part of the assignment to work on.
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Music Warehouse
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Adjusted Trial Balance
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December 31, 2008
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Debit
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Credit
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| Cash |
$24,675
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| Accounts Receivable |
5,625
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| Inventory |
65,980
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| Land |
93,000
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| Building |
289,000
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| Accumulated Depreciation |
75,000
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| Notes Payable |
85,000
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| Accounts Payable |
53,600
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| Interest Payable |
4,750
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| Common Stock |
10,000
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| Additional Paid-in Capital |
120,000
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| Dividends |
10,000
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| Retained Earnings |
59,980
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| Sales |
937,500
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| Sales Discounts |
22,675
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| Cost of Goods Sold |
723,000
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| Salaries |
81,000
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| Utilities |
8,900
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| Repairs & Maintenance |
5,225
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| Telephone |
2,850
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| Interest Expense |
4,400
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| Depreciation Expense |
9,500
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$1,345,830
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$1,345,830
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The following is additional information needed for financial-statement preparation:
- Loss as a result of hurricane damage on the building: $17,000 (assume that the building is not located in an area that sustains frequent hurricane damage.)
- Loss because of the discontinuation of the cassette tape music segment: $26,875
- Beginning of the year balance of common stock: $8,000 (assume that changes are related to issuance of common stock.)
- Beginning of the year balance of additional paid-in capital: $102,000
- Effective income tax rate: 35%
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