| Purpose of Assignment |
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| The purpose of this assignment is to help you become familiar with the parts of the multiple?step income statement. |
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| Assignment Steps |
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| Resources:Financial Accounting: Tools for Business Decision Making |
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| 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. |
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| SIMON COMPANY |
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| Income Statement |
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| For the Year Ended December 31, 2017 |
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| Revenues | |
| Net sales | $850,000 |
| Other revenues |
22,000 |
| 8,72,000 | |
| Cost of goods sold |
5,55,000 |
| Gross profit |
3,17,000 |
| Operating expenses |
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| Selling expenses |
1,09,000 |
| Administrative expenses |
1,03,000 |
| 2,12,000 | |
| Net earnings |
$105,000 |
| As an experienced, knowledgeable accountant, you review the statement and determine the following facts: |
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| 1. Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. |
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| 2. Other revenues consist of sales discounts $18,000 and rent revenue $4,000. |
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| 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. |
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| 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. |
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| Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate. |
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| Show your work on the Excel® spreadsheet and submit with your explanation. |
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