Question

Information from the December 31, 2020, year-end unadjusted trial balance of Woodstock Store is as follows:

	Debit			Credit
Cash	$	3,590
Merchandise inventory		31,490
Store supplies		1,805
Office supplies		735
Prepaid insurance		4,050
Store equipment		57,705
Accumulated depreciation, store equipment				$	6,840
Office equipment		13,190
Accumulated depreciation, office equipment					6,640
Accounts payable					4,090
Zen Woodstock, capital					52,090
Zen Woodstock, withdrawals		31,590
Rental revenue					14,690
Sales					501,610
Sales returns and allowances		3,005
Sales discounts		5,280
Purchases		330,595
Purchase returns and allowances					2,230
Purchase discounts					4,815
Transportation-in		3,780
Sales salaries expense		34,800
Rent expense, selling space		24,090
Advertising expense		6,490
Store supplies expense		0
Depreciation expense, store equipment		0
Office salaries expense		27,720
Rent expense, office space		13,090
Office supplies expense		0
Insurance expense		0
Depreciation expense, office equipment		0
Totals	$	593,005		$	593,005

a. The balance on January 1, 2020, in the Store Supplies account was $534. During the year, $1,271 of store supplies were purchased and debited to the Store Supplies account. A physical count on December 31, 2020, shows an ending balance of $198.
b. The balance on January 1, 2020, in the Office Supplies account was $68. Office supplies of $667 were purchased in 2020 and added to the Office Supplies account. An examination of the office supplies at year-end revealed that $626 had been used.
c. The balance in the Prepaid Insurance account represents a policy purchased on September 1, 2020; it was valid for 12 months from that date.
d. The store equipment was originally estimated to have a useful life of 12 years and a residual value of $1,545.
e. When the office equipment was purchased, it was estimated that it would last 5 years and have no residual value.
f. Ending merchandise inventory, 30,800.

Required:
Prepare a classified multiple-step income statement.

Answer 1

	Debit		Credit		salvage value	asset amt- salvage vale	depreciation
a	Store supplies expense	198	Store supplies	198	Stock of Stores supplies accounted
b	Office supplies expense	109	Office supplies	109	Stock of office supplies accounted
c	Insurance (4 months)	1,350	Prepaid insurance	1,350	insurance from 01sep to 31Dec
d	Depreciation expense, store equipment	4,680	Accumulated depreciation, store equipment	4,680	1,545	56,160	4,680
e	Depreciation expense, office equipment	2,638	Accumulated depreciation, office equipment	2,638	-	13,190	2,638
f	Purchases	690	Merchandise inventory	690	excess inventory accounted, corrected

Item#		Un-Adjusted Trial Balance		Adjustment		Adjusted Trial Balance
		Debit	Credit	Debit	Credit	Debit	Credit
	Cash	3,590		-	-	3,590	-
	Merchandise inventory	31,490		-	690	30,800	-
	Store supplies	1,805		-	198	1,607	-
	Office supplies	735		-	109	626	-
	Prepaid insurance	4,050		-	1,350	2,700	-
	Store equipment	57,705		-	-	57,705	-
	Accumulated depreciation, store equipment		6,840	-	4,680	-	11,520
	Office equipment	13,190		-	-	13,190	-
	Accumulated depreciation, office equipment		6,640	-	2,638	-	9,278
	Accounts payable		4,090	-	-	-	4,090
	Zen Woodstock, capital		52,090	-	-	-	52,090
	Zen Woodstock, withdrawals	31,590		-	-	31,590	-
1	Rental revenue		14,690	-	-	-	14,690
2	Sales		5,01,610	-	-	-	5,01,610
3	Sales returns and allowances	3,005		-	-	3,005	-
4	Sales discounts	5,280		-	-	5,280	-
5	Purchases	3,30,595		690	-	3,31,285	-
6	Purchase returns and allowances		2,230	-	-	-	2,230
7	Purchase discounts		4,815	-	-	-	4,815
8	Transportation-in	3,780		-	-	3,780	-
9	Sales salaries expense	34,800		-	-	34,800	-
10	Rent expense, selling space	24,090		-	-	24,090	-
11	Advertising expense	6,490		-	-	6,490	-
12	Store supplies expense	-		198	-	198	-
13	Depreciation expense, store equipment	-		4,680	-	4,680	-
14	Office salaries expense	27,720		-	-	27,720	-
15	Rent expense, office space	13,090		-	-	13,090	-
16	Office supplies expense	-		109	-	109	-
17	Insurance expense	-		1,350	-	1,350	-
18	Depreciation expense, office equipment	-		2,638	-	2,638	-
	Totals	5,93,005	5,93,005	9,665	9,665	6,00,323	6,00,323

Income Statement	2,020	Item #
Sales	4,98,605	2-3
Other Income	14,690	1
Cost of Goods Sold	3,29,017	5-6-7+8 & change in Inventory
Gross Profit	1,84,278
Operating Expenses
Selling Expenses	70,660	4+9+10+11
Adminstrative Expenses	49,785	12 to 18
Total Operating Expenses	1,20,445
Operating Income	63,833
Interest Expenses	-
Income before taxes	63,833
Income tax
Net Income after taxes	63,833