Answer: ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

 

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ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement

ACC 290 WEEK 3 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.

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 $17,000, 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.

Follow APA guidelines for your paper and include your textbook reference as source.

Click the Assignment Files tab to submit your assignment.

ACC 290 WEEK 3 Preparing a Multiple‐Step Income Statement