Question

P3-4 Second-Hand Almost New Department Store Inc. is located near a shopping mall. At the end of the company's fiscal year on December 31, 2017, the following accounts appeared in two of its trial balances: Accounts payable Accounts receivable Accumulated depreciation building Accumulated depreciation equipment Buildings Cash Common shares Cost of goods sold Depreciation expense Dividends Equipment Insurance expense Interest expense Interest income Interest payable Inventory Mortgage payable Prepaid insurance Property tax expense Property tax payable Retained earnings Salaries and wages expense Sales commission expense Sales commission payable Sales returns and allowances Sales revenue Utilities expense Unadjusted $ 79,300 95,300 42,100 29,600 190,000 68,000 160,000 412,700 -0- 28,000 110,000 -0 3,000 4,000 -0 75,000 80,000 9,600 -O -0- 16,600 108,000 11,000 -0- 8,000 718,000 11,000 Adjusted $ 79,300 95,300 52,500 42,900 190,000 68,000 160,000 412,700 23,700 28,000 110,000 7,200 11,000 4,000 8,000 75,000 80,000 2,400 4,800 4,800 16,600 108,000 14,500 3,500 8,000 718,000 11,000 Analysis reveals the following additional information: 1. Insurance expense and utilities expense are 60% selling and 40% administrative. 2. In the next year, $20,000 of the mortgage payable will be due for payment. 3. Property tax expense and depreciation on the building are administrative expenses; depreciation on the equipment is a selling expense; and $32,000 of the salaries and wages expense related to office salaries and the remainder related to sales salaries. Depreciation expense includes $10,400 relating to the building and $13,300 relating to equipment. Instructions (a) Prepare a multiple-step income statement, statement of retained earnings, and classified balance sheet. (Hint: Use Illustrations 3A-2 to 3A-4 as models or look ahead Chapter 4 to see what a multiple-step income statement is.)

Answer 1

Second Hand almost New Department Store Inc. Adjusting Enteries Trans. Particulars 1 Depreciation Expense Accum.Depre- Building Accum.Depre - Equipment (To record depreciation) Debit in $ Credit in $ 23700 10400 13300 2 7200 Insurance Expense Prepaid Insurance (Insurance expired) 7200 3 8000 Interest Expense Interest Payable (Interest accrued) 8000 4 4800 Property Tax Expense Property Tax Payable (Expense accrued) 4800 5 3500 Sales Commission Expense Sales Commission Payable (Expense accrued) 3500 7200 Closing Enteries Date Particulars Debit in $ Credit in $ 31.12.2017 Income Summary 600900 Sales Returns and Allowances 8000 Cost of goods sold 412700 Depreciation Expense - Equipment 13300 Insurance Expense Salaries and Wages Expense 108000 Sales Commission Expense 14500 Utilities Expense 11000 Depreciation Expense - Building 10400 Property Tax Expense 4800 Interest Expense 11000 (Expense accounts closed) 718000 4000 31.12.2017 Sales Revenue Interest Income Income Summary (Revenue accounts closed) 722000 121100 31.12.2017 Income Summary Retained Earnings (Profits Transferred) 121100 28000 31.12.2017 Retained Earnings Dividends (Dividend account closed) 28000

Statement of Income For the period ending 31.12.2017 Sales Revenue Sales Returns and Allowances Net Sales Cost of goods sold Gross Profit 718000 -8000 710000 412700 297300 Selling Expenses: Depreciation Expense - Equipment Insurance Expense Salaries and Wages Expense Sales Commission Expense Utilities Expense 13300 4320 76000 14500 6600 114720 10400 2880 4800 32000 Administrative Expense: Depreciation Expense - Building Insurance Expense Property Tax Expense Salaries and Wages Expense Utilities Expense Operating Income Non Operating Items: Interest Income Interest Expense Net Income 4400 54480 128100 4000 -11000 -7000 121100 Statement of Retained Earnings For the period ending 31.12.2017 Beginning Balance Net Income 16600 121100 137700 -28000 Dividends 109700

Amounts in $ Amounts in $ Balance sheet As at 31.12.2017 Assets Current Assets Cash Accounts Receivable Inventory Prepaid Insurance Amounts in $ Amounts in $ Liabilities Current Liabilities 68000 Accounts Payable 95300 Interest Payable 75000 Property Tax Payable 2400 240700 Sales Commission Payable 79300 8000 4800 3500 95600 Non Current Liabilities Mortgage Payable 80000 190000 -52500 Non Current Assets Building Accum.Depre - Building Equipment Accum.Depre - Equipment Total Assets 110000 160000 137500 Shareholders Equity Common Stock 67100 Retained Earnings 445300 Total Liabilities & Equity -42900 109700 269700 445300 0