Question

PR 5-5A Multiple-step income statement and balance sheet come The following selected accounts and their current balances appear in the ledger of Obj. 3 3.400 Clairemont Co, for the fiscal year ended May 31, 2018: Cash $ 240,000 Retained Earnings Accounts Receivable $ 2,949,100 966,000 Dividends LEDGE Inventory 100,000 1,690,000 Sales Estimated Returns Inventory 11,343,000 22,500 Cost of Goods Sold Office Supplies 7,850,000 13,500 Sales Salaries Expense 916,000 Prepaid Insurance 8,000 Advertising Expense 550,000 Office Equipment 830,000 Depreciation Expense- Accumulated Depreciation- Store Equipment 140,000 Office Equipment 550,000 Miscellaneous Selling Expense 38,000 Store Equipment 3,600,000 Office Salaries Expense 650,000 Accumulated Depreciation- Rent Expense 94,000 Store Equipment 1,820,000 Depreciation Expense- Accounts Payable 326,000 Office Equipment 50,000 Customer Refunds Payable 40,000 Insurance Expense 48,000 Salaries Payable 41,500 Office Supplies Expense 28,100 Note Payable Miscellaneous Administrative Exp. 14,500 (final payment due 2024) 300,000 Interest Expense 21,000 Common Stock 500,000 Instructions 1. Prepare a multiple-step income statement. 2. Prepare a retained earnings statement. 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

Required 1 :

CLAIREMONT CO.
Multiple-Step Income Statement
For the year ended May 31,2018
Revenue from sales :
Sales			$ 11,343,000
Less: Cost of goods sold			($7,850,000)
Gross Profit			$ 3,493,000
Less: Selling Expenses:
Sales salaries expenses	$ 916,000
Advertising expenses	$ 550,000
Depreciation expense-Store Equipment	$ 140,000
Miscellaneous selling expenses	$ 38,000
Total Selling expenses		($ 1,644,000)
Less: Administrative Expenses:
Office salaries expenses	$ 650,000
Rent expenses	$ 94,000
Depreciation expense-office Equipment	$ 50,000
Insurance expenses	$ 48,000
Office supplies expenses	$ 28,100
Miscellaneous Administrative expenses	$ 14,500
Total Administrative Expenses		($ 884,600)
Total operating Expenses			($2,528,600)
Income from operations			$ 964,400
Less: Other Expenses:
Interest expenses			($21,000)
Net income			$ 943,400

Required 2 :

CLAIREMONT CO.
Retained Earnings Statement
For the year ended May 31,2018
Retained earnings-Beginning	$ 2,949,100
Add: Net income	$ 943,400
Total	$ 3,892,500
Less: Dividends	($100,000)
Retained earnings-Ending	$ 3,792,500

Required 3 :

CLAIREMONT CO.
Balance Sheet
May 31,2018
ASSETS :
Current assets :
Cash		$ 240,000
Accounts receivable		$ 966,000
inventory		$ 1,690,000
Estimated return inventory		$ 22,500
office supplies		$ 13,500
Prepaid Insurance		$ 8,000
Total Current assets			$ 2,940,000
Property, Plant and Equipment :
Office equipment	$ 830,000
Less: Accumulated Depreciation-Office equipment	($550,000)	$ 280,000
Store equipment	$ 3,600,000
Less: Accumulated Depreciation-Store equipment	($1,820,000)	$ 1,780,000
Total Property, Plant and Equipment			$ 2,060,000
Total assets			$ 5,000,000
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current liabilities:
Accounts Payable		$ 326,000
Customer Refunds Payable		$ 40,000
Salaries payable		$ 41,500
Total Current liabilities			$ 407,500
Long term liabilities :
Notes payable (due in 2024)			$ 300,000
Total liabilities			$ 707,500
Shareholder's equity :
Common Stock		$ 500,000
Retained earnings		$ 3,792,500
Total Shareholder's equity			$ 4,292,500
Total liabilities and shareholder's equity			$ 5,000,000

Required 4 :

The multiple step form of income statement contains various sections for Revenues and Expenses

with intermediate balances and concludes with Net income .

Where as In single step form of income statement contains total of all Expenses is deducted

from the total of all Revenues.And there is no Intermediate balances.