Description
Excel spreadsheet is attached. In addition a 700 word explanation of the data. Below is the instructor requirements: 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 | |
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:
- Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000.
- Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
- 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.
- Administrative expenses consist of office salaries $17,000, 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.
Show your work on the Excel® spreadsheet and submit with your explanation.
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Explanation & Answer
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SIMON COMPANY
Multi- step Income Statement
For the Year Ended December 31, 2017
Sales Revenue
$
Sales Revenue
$911,000
Less:
Sales returns and allowances
$28,000
Sales discounts
$18,000
(46,000)
Net sales
865,000
Less: Cost of goods sold
555,000
Gross profit
310,000
Operating expenses
Salaries and wages expense
106,000
Freight-out
33,000
Rent expense ($24,000 – $6,000)
18,000
Advertising expense
13,000
Utilities expense
12,000
Depreciation expense
10,000
Total expenses
Income from operations
192,000
118,000
Other revenues and gains
Rent revenue
Other expenses and losses
4,000
Interest expense
Income before income tax
Income tax expense
Net income
(2,000)
120,000
120000*25% (30,000)
$90,000
The income statement is the most important form of financial statement, it comprises of revenues
and expenses. It is not simply revenue minus expenses. It contains components which ar...
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