Question

3 The adjusted trial balance data given below is from the Morgan Company's worksheet for the year ended December 31, 2019. The expense accounts numbered 611-615 represent selling expenses, and those numbered 621-631 represent general and administrative expenses. ACCT. NO. 399 401 451 491 501 502 503 504 611 613 615 621 623 ACCOUNT NAME Income Summary Sales Sales Returns and allowances Interest Income Purchases Freight In Purchases Returns and Allowances Purchases Discounts Sales Salaries Expense Advertising Expense Travel Expense Office Salaries Expense Office Supplies Expense Utilities Expense Payroll Taxes Expense Uncollectible Accounts Expense Depreciation Expense - Office Equipment Interest Expense ADJUSTED TRIAL BALANCE DEBIT CREDIT 61,000 58,000 270,000 4,100 770 135,000 3,200 1,800 2,100 56,000 2,300 11,700 18,500 770 4,700 1,700 1,370 570 1,800 627 629 631 691 Prepare a classified income statement for the year ended December 31, 2019.

Answer 1

MORGAN COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2019

Operating Revenue:
Net sales*		$265,900
Less: cost of goods sold*		(134,300)
Gross profit		131,600
Operating expenses:
Selling expenses:
Sales salaries expense	56,000
Advertisement expense	2,300
Travel expense	11,700
Total selling expenses	70,000
General and administrative expenses:
Office salaries expense	18,500
Office supplies expense	770
Utilities expense	4,700
Payroll tax expense	1,700
Uncollectible account expense	1,370
Depreciation expense	570
Total general and administrative expenses	27,610
Total operating expenses		97,610
Net operating income		33,990
Non operating income and expenses:
Interest income	770
Other Income	58,000
Interest expenses	(1,800)
Other expenses	(61,000)
Total non operating income/(loss)		(4,030)
Net income		29,960

Working note:

		Amount ($)
(1)	Sales	270,000
	Less: sales return and allowances	(4,100)
	Net sales	265,900
(2)	Cost of goods available for sale
	Purchase	135,000
	Add: freight in	3,200
	Less: Purchase return and allowances	(1,800)
	Less: Purchase discount	(2,100)
	Net Purchase	134,300

(3) There are no any beginning and ending inventory of goods hence value of net purchase will be considered as cost of goods available and cost of goods sold.

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