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ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

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ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

Description

ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

ACC 290 WEEK 3 Preparing a 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 expenses 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.

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.

Click the Assignment Files tab to submit your assignment.

ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement