Reference no: EM131586046
Preparing a Multiple-Step Income Statement
Purpose of Assignment - The purpose of this assignment is to help you become familiar with the parts of the multiple-step income statement.
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 around 700 wrds Assume a 25% tax rate.