1) Multi-step income statement: | |
Amount $ | |
Sales revenue | 17000000 |
Less:Sales discount | 204000 |
Less:Sales returns | 807500 |
Net Sales revenue | 15988500 |
Less: Cost of Goods Sold | 9305099 |
Gross Profit | 6683401 |
Less:Selling Expenses: | |
Advertising expense | 318750 |
Bad Debt Expense | 22100 |
sales Force Salaries exp. | 233750 |
Selling commissions exp. | 850000 |
Shipping expense | 139188 |
Misc. Selling Exp. | 82875 |
Total Selling Expenses | 1646663 |
Income before Admin expenses | 5036738 |
Less:Administration Expenses: | |
Depreciation exp. | 1020000 |
Executive Salaries exp. | 743750 |
Insurance expense | 84125 |
Office Supplies exp. | 65875 |
Legal and consulting exp. | 10625 |
Utilities exp. | 127500 |
Misc. Admin exp. | 8394 |
Total Admin Expenses | 2060269 |
Income before Finance cost | 2976469 |
Less:Interest exp. | 108375 |
Income before other income | 2868094 |
Add:Rent revenue | 53125 |
Income before Tax | 2921219 |
Less:Income Tax Exp. | 876366 |
Net Income | 2044853 |
2) Profit Margin = NI/Net Sales = 2044853/15988500 = 12.79% |
Earnings per Share = NI/Com. Shares O/s = 2044853/200000 = $10.22 per share |
(assuming Par Value of the Common Share being $10, so Number of Shares= |
$2000000/10 = 200000 shares) |
3) Closing entries: | |||
Date | Accounts Title | Debit $ | Credit $ |
12/31/Year 2 | Sales revenue | 17000000 | |
Rent revenue | 53125 | ||
Income Summary | 17053125 | ||
(revenues transferred to Income summary) | |||
12/31/Year 2 | Income Summary | 15008272 | |
Sales discount | 204000 | ||
Sales returns | 807500 | ||
Cost of Goods Sold | 9305099 | ||
Advertising expense | 318750 | ||
Bad Debt Expense | 22100 | ||
sales Force Salaries exp. | 233750 | ||
Selling commissions exp. | 850000 | ||
Shipping expense | 139188 | ||
Misc. Selling Exp. | 82875 | ||
Depreciation exp. | 1020000 | ||
Executive Salaries exp. | 743750 | ||
Insurance expense | 84125 | ||
Office Supplies exp. | 65875 | ||
Legal and consulting exp. | 10625 | ||
Utilities exp. | 127500 | ||
Misc. Admin exp. | 8394 | ||
Interest exp. | 108375 | ||
Income Tax Exp. | 876366 | ||
(being expenses transferred to Income summary) | |||
12/31/Year 2 | Income Summary | 2044853 | |
Net Income | 2044853 | ||
(Income summary balance transferred to Net Income) | |||
12/31/Year 2 | Net Income | 2044853 | |
Retained Earnings | 2044853 | ||
(Net Income transferred to Retained Earnings) | |||
12/31/Year 2 | Retained Earnings | 270000 | |
Dividends | 270000 | ||
(Dividend paid transferred to retained earnings) |
Goal: Practice creating a multi-step income statement in good form. Information: Management would like you to...
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