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 $6,000 for the first quarter of 2018.
Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate.
Show your work on the Excel® spreadsheet and submit with your explanation.
Two documents will be needed - an Excel document and an APA formatted Word document.
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Explanation & Answer
Here you go....
Name
Section
Date
Problem 5-5A
Simon Company
SIMON COMPANY
Income Statement
For the Year Ended December 31, 2017
Particulars
Sales Revenue
Less: Sales returns and allowances
Sales Discounts
Amount ($)
28,000
18,000
Net Sales
Less: Cost of goods sold
Gross Profit
Less: Operating Expenses:
Salaries and Wages Expenses
Amount ($)
911,000
(46,000)
865,000
(555,000)
310,000
136,000
Depreciation Expenses
Advertising Expense
Freight-out
Rent Expense
Utilities Expense
10,000
13,000
33,000
18,000
12,000
Total Operating Expenses
Income from operations
Add: Other Revenues and Gain:
Rent Revenue
Less: Other Expenses and Losses:
(222,000)
88,000
4,000
Interest Expense
Income before income taxes
Less: Income Tax Expense
Net Income
(2,000)
90,000
(22,500)
67,500
Calculating salaries and wages expense:
Salaries and wages expense= Salesperson Salaries + Sales Commissions + Office Salaries
= $80,000 + $9,000 +$47,000
= $136,000
Calculating Income Tax Expense:
Income Tax Expense = Income before income taxes x Tax Rate
= $90,000 x 25%
289
= $90,000 x 25%
= $22,500
289
Preparing a Multiple-Step Income Statement
1
Name
Preparing a Multiple-Step Income Statement
ACC 290
Instructor
Date
Preparing a Multiple-Step Income Statement
...
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