The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019:
Cash $ 240,000 Kristina Marble, Drawing $ 100,000 Accounts Receivable 966,000 Sales 11,343,000 Merchandise Inventory 1,690,000 Cost of Merchandise Sold 7,850,000 Estimated Returns Inventory 22,500 Sales Salaries Expense 916,000 Office Supplies 13,500 Advertising Expense 550,000 Prepaid Insurance 8,000 Depreciation Expense — Office Equipment 830,000 Store Equipment 140,000 Accumulated Depreciation— Miscellaneous Selling Expense 38,000 Office Equipment 550,000 Office Salaries Expense 650,000 Store Equipment 3,600,000 Rent Expense 94,000 Accumulated Depreciation — Depreciation Expense — Store Equipment 1,820,000 Office Equipment 50,000 Accounts Payable 326,000 Insurance Expense 48,000 Customer Refunds Payable 40,000 Office Supplies Expense 28,100 Salaries Payable 41,500 Miscellaneous Administrative Exp. 14,500 Note PayableInterest Expense 21,000 (final payment due 2022) 300,000 Kristina Marble, Capital 3,449,100
Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner’s equity.
3. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.
4. Briefly explain how multiple-step and single-step income statements differ.
Answer:
1.
Sales$11,343,000
Cost of merchandise sold7,850,000
Gross profit$ 3,493,000
Expenses:
Selling expenses:
Sales salaries expense $916,000
Advertising expense 550,000
Depreciation expense—store
equipment140,000
Miscellaneous selling expense 38,000
Total selling expenses $1,644,000
Administrative expenses:
Office salaries expense $650,000
Rent expense94,000
Depreciation expense—office
equipment50,000
Insurance expense 48,000
Office supplies expense 28,100
Miscellaneous administrative
expense14,500
Total administrative expenses 884,600
Total operating expenses2,528,600
Income from operations$ 964,400
Other expense:
Interest expense21,000
Net income$ 943,400
2.
Kristina Marble, capital, June 1, 2018$3,449,100
Net income for the year$ 943,400
Withdrawals(100,000)
Increase in owner’s equity843,400
Kristina Marble, capital, May 31, 2019$4,292,500
3.
Current assets:
Cash$ 240,000
Accounts receivable966,000
Merchandise inventory1,690,000
Estimated returns inventory22,500
Office supplies13,500
Prepaid insurance8,000
Total current assets$2,940,000
Property, plant, and equipment:
Office equipment $ 830,000
Less accumulated depreciation 550,000 $ 280,000
Store equipment $3,600,000
Less accumulated depreciation 1,820,000 1,780,000
Total property, plant, and equipment2,060,000
Total assets$5,000,000
Current liabilities:
Accounts payable$ 326,000
Customer refunds payable40,000
Salaries payable41,500
Note payable (current portion)50,000
Total current liabilities$ 457,500
Long-term liabilities:
Note payable (final payment due 2022)250,000
Total liabilities$ 707,500
Kristina Marble, capital4,292,500
Total liabilities and owner’s equity$5,000,000
4. The multiple-step form of income statement contains various sections for
revenues and expenses, with intermediate balances, and concludes with
net income. In the single-step form, the total of all expenses is deducted
from the total of all revenues. There are no intermediate balances.