Prepare an income statement for the year

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Reference no: EM131638202

Question 1 -(Multiple-Step and Single-Step) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2014 information related to P. Bride Company ($000 omitted).

Administrative expense Officers' salaries                       $ 4,900

Depreciation of office furniture and equipment               3,960

Cost of goods sold                                                      60,570

Rent revenue                                                             17,230

Selling expense

Delivery expense                                                       2,690

Sales commissions                                                     7,980

Depreciation of sales equipment                                  6,480

Sales revenue                                                           96,500

Income tax                                                               9,070

Interest expense                                                       1,860

Instructions

(a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares out-standing for 2014 total 40,550 (000 omitted).

(b) Prepare an income statement for the year 2014 using the single-step form.(c) Which one do you prefer? Discuss.

Question 2 - (Preparation of a Balance Sheet) Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.

                                                                         Debit                           Credit

Cash                                                                  $ 197,000

Sales Revenue                                                                                   $ 8,100,000

Debt Investments (trading) (at cost, $145,000)      153,000

Cost of Goods Sold                                              4,800,000

Debt Investments (long-term)                              299,000

Equity Investments (long-term)                            277,000

Notes Payable (short-term)                                                                 90,000

Accounts Payable                                                                               455,000

Selling Expenses                                                 2,000,000

Investment Revenue                                                                          63,000

Land                                                                  260,000

Buildings                                                            1,040,000

Dividends Payable                                                                             136,000

Accrued Liabilities                                                                              96,000

Accounts Receivable                                           435,000

Accumulated Depreciation-Buildings                                                    152,000

Allowance for Doubtful Accounts                                                         25,000

Administrative Expenses                                     900,000

Interest Expense                                                211,000

Inventory                                                          597,000

Gain (extraordinary)                                                                         80,000

Notes Payable (long-term)                                                                 900,000

Equipment                                                         600,000

Bonds Payable                                                                                  1,000,000

Accumulated Depreciation-Equipment                                                 60,000

Franchises                                                         160,000

Common Stock ($5 par)                                                                    1,000,000

Treasury Stock                                                  191,000

Patents                                                             195,000

Retained Earnings                                                                             78,000

Paid-in Capital in Excess of Par                                                          80,000

 Totals                                                              $12,315,000             $12,315,000

Instructions:

Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes.)

Question 3 -(Preparation of a Statement of Cash Flows) Presented below is a condensed version of the comparative balance sheets for Zubin Mehta Corporation for the last two years at December 31.

                                                              2014                       2013

Cash                                                       $177,000                 $ 78,000

Accounts receivable                                  180,000                   185,000

Investments                                             52,000                    74,000

Equipment                                                298,000                  240,000

Accumulated depreciation-equipment          (106,000)               (89,000)

Current liabilities                                       134,000                 151,000

Common stock                                          160,000                 160,000

Retained earnings                                      307,000                 177,000

Additional information: Investments were sold at a loss (not extraordinary) of $10,000; no equipment was sold; cash dividends paid were $30,000; and net income was $160,000.

Instructions

(a) Prepare a statement of cash flows for 2014 for Zubin Mehta Corporation.

(b) Determine Zubin Mehta Corporation's free cash flow.

Reference no: EM131638202

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