Description
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 $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.
Show your work on the Excel® spreadsheet and submit with your explanation.
Explanation & Answer
Hello,Thank you
SIMON COMPANY
Corrected Income Statement
for the Yr ended Dec 31. 2017
Details
Revenue
Sale
Less;
Freight Out
Sales Returns & Allowance
Sales Discount
Total Revenue Deduction
Net sales
Other Revenue- Rent revenue
Total Revenue Deduction
Cost Of Goods Sold
Gross Profit
Less :
Wages & Salaries
Salesperson's salary
Office salary
Total Salaries
Selling Expenses
Sales equipment depreciation
Advertising
Sales commision paid
Add:Sales commission outstanding
Administrative expenses
Administrative expenses
Utilities
Rent expense
less Prepaid rent
Total Admin expense
Earning before Interest & Tax
Finance Expense: Interest expense
Correction Amt $
Amt $
911.000
33.000
28.000
18.000
79.000
832.000
4.000
836.000
555.000
281.000
80.000
47.000
127.000
10.000
13.000
6.000
3.000
32.000
12.000
24.000
-6.000
30.000
92.000
2.000
Earning before Tax
90.000
Income Tax @25%
22.500
Net Earning after Tax
67.500
Attached.
Running Head: Multiple Step Income Statement
1
Multiple Step Income Statement:
Student’s Name:
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