An inexperienced accountant prepared this condensed income
statement for Cullumber Company, a retail firm that has been in
business for a number of years.
CULLUMBER
COMPANY Income Statement For the Year Ended December 31, 2017 |
||
Revenues | ||
Net sales | $901,000 | |
Other revenues | 23,320 | |
924,320 | ||
Cost of goods sold | 588,300 | |
Gross profit | 336,020 | |
Operating expenses | ||
Selling expenses | 115,540 | |
Administrative expenses | 109,180 | |
224,720 | ||
Net earnings | $111,300 |
As an experienced, knowledgeable accountant, you review the
statement and determine the following facts.
1. | Net sales consist of sales $965,660, less freight-out on merchandise sold $34,980, and sales returns and allowances $29,680. | |
2. | Other revenues consist of sales discounts $19,080 and rent revenue $4,240. | |
3. | Selling expenses consist of salespersons’ salaries $84,800; depreciation on equipment $10,600; advertising $13,780; and sales commissions $6,360. The commissions represent commissions paid. At December 31, $3,180 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense. | |
4. | Administrative expenses consist of office salaries $49,820; dividends $19,080; utilities $12,720; interest expense $2,120; and rent expense $25,440, which includes prepayments totaling $6,360 for the first quarter of 2018. |
Prepare a correct detailed multiple-step income statement. Assume a
25% tax rate. (List other revenues before other
expenses. Round answers to 0 decimal places, e.g.
5,125.)
Detailed Multi-step Income statement for the year ended December 31, 2017:- | |||||
CULLUMBER COMPANY | |||||
Income Statement | |||||
For the Year Ended December 31, 2017 | |||||
Operating Revenue | |||||
Sales | 965,660 | ||||
Less: | Sales returns | 29,680 | |||
Less: | Sales Discounts | 19,080 | |||
Net Sales | 916,900 | ||||
Cost of Goods Sold | |||||
Cost of Goods sold | 588,300 | ||||
Gross Profit (Loss) | 328,600 | ||||
Operating Expenses | |||||
Selling Expenses | |||||
Freight-out | 34,980 | ||||
Salaries Expense—Sales | 84,800 | ||||
Depreciation Expense— Equipment | 10,600 | ||||
Advertising | 13,780 | ||||
Sales commissions (6360+3180) | 9,540 | ||||
Total Selling Expenses | 153,700 | ||||
General and Administrative expenses | |||||
Salaries Expense—Office | 49,820 | ||||
Utilities Expense | 12,720 | ||||
Rent Expense (25440-6360) | 19,080 | ||||
Total General and Administrative expenses | 81,620 | ||||
Less: | Total Operating Expenses | 235,320 | |||
Operating Income (Loss) | 93,280 | ||||
Other Income and Expenses | |||||
Other Revenue | |||||
Rent Revenue | 4,240 | ||||
Other expense | - | ||||
Less | Interest Expense | 2,120 | |||
Net Other Incomes and Expenses | - | 2,120 | |||
Income before taxes | 95,400 | ||||
Less: | Tax Expense (95400*25%) | 23,850 | |||
Net Income | 71,550 |
Feel free to ask any clarification, if required. Please provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you.
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