Preparing a multiple step income statement

May 12, 2022/in Uncategorized /by Liz

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: Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. Other revenues consist of sales discounts $18,000 and rent revenue $4,000. 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. 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.