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 |
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.
Preparea detailed multi-step income statement with a
brief explanation of 700 words. Assume a 25% tax rate.
Showyour work on the Excel®spreadsheet and submit with your explanation.
