Preparing a MultipleStep Income Statement ACC290 Week 3

     

    Preparing a MultipleStep Income Statement ACC290 Week 3

    Purpose of Assignment 

    The purpose of this assignment is to help you become familiar with the parts of the multiple‐step income statement. 

    Assignment Steps 

    Resources: Financial Accounting: Tools for Business Decision Making 

    Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years.

     

    SIMON COMPANY

    Income Statement
    For the Year Ended December 31, 2017

     

    Revenues

     

    Net sales

    $850,000

    Other revenues

    22,000

     

    872,000

    Cost of goods sold

    555,000

    Gross profit

    317,000

    Operating expenses

     

    Selling expenses

    109,000

    Administrative expenses

    103,000

     

    212,000

    Net earnings

    $105,000

    As an experienced, knowledgeable accountant, you review the statement and determine the following facts:

    1. Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000.
    2. Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
    3. Selling expenses consist of salespersons' salaries $80,000, depreciation on equipment $10,000, advertising $13,000, and sales commissions $6,000.  The commissions represent commissions paid. At December 21, $3,000 of commissions have been earned by salespersons but have not been paid.  All compensation should be recorded as Salaries and Wages Expense.
    4. Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018. 

    Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate. 

                                                                                                                                      Order Now