Reference no: EM13183248

It is the end of a reporting period. Because there are more people than usual retiring this year, your manager has asked your accounting department to create 2 things:

• A process documentation detailing the different methods of preparing income statements, specific sections of the income statement, and how to handle the special types of income statement items

• Basic financial statements for your company

o Select a company filing of your choice that contains a multiple-step income statement.

o Communicate your selection with your group (each of you should submit a different company).

o Submit the link to this filing as proof of your research.

2. Prepare a process documentation that

o is prepared in a professional manner because it will be the desktop guide used by others in the event of your absence to prepare the financial statements for Music Warehouse.

o is in the form of a memorandum or as a numbered listing of items, depending on your individual preference.

o includes the following elements:

- a definition and description of the specific sections of the income statement

- a description of the different methods of preparing income statements

- an explanation of the conceptual guidelines for reporting income

- how to handle the special types of income statement items

Using the information below, do the following:

• Prepare a multiple-step income statement for Music Warehouse.
• Prepare a statement of changes in stockholder's equity for Music Warehouse.

Music Warehouse
Adjusted Trial Balance
December 31, 2008
Cash	Debit $24,675	Credit
Accounts Receivable	5,625
Inventory	65,980
Land	93,000
Building	289,000
Accumulated Depreciation		75,000
Notes Payable		85,000
Accounts Payable		53,600
Interest Payable		4,750
Common Stock		10,000
Additional Paid-in Capital		120,000
Dividends	10,000
Retained Earnings		59,980
Sales		937,500
Sales Discounts	22,675
Cost of Goods Sold	723,000
Salaries	81,000
Utilities	8,900
Repairs & Maintenance	5,225
Telephone	2,850
Interest Expense	4,400
Depreciation Expense	9,500
$1,345,830		$1,345,830

The following is additional information needed for financial-statement preparation:

• Loss as a result of hurricane damage on the building: $17,000 (assume that the building is not located in an area that sustains frequent hurricane damage.)

• Loss because of the discontinuation of the cassette tape music segment: $26,875

• Beginning of the year balance of common stock: $8,000 (assume that changes are related to issuance of common stock.)

• Beginning of the year balance of additional paid-in capital: $102,000

• Effective income tax rate: 35%

Objective:

• Understand the concepts of income, explain the conceptual guidelines for reporting income, and define the elements of an income statement.

• Classify the assets and liabilities of a balance sheet, explain the statement of changes in stockholders' equity, and describe the Security and Exchange Commission (SEC) integrated disclosures and the major components of an income statement, compute income from continuing operations, and report the results from discontinued operations.