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.