Question

Sage Hill 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:

		Unadjusted		Adjusted
Accounts Payable		$80,600		$80,600
Accounts Receivable		90,800		90,800
Accumulated Depreciation—Building		42,200		52,100
Accumulated Depreciation—Equipment		30,400		43,800
Buildings		182,000		182,000
Cash		69,800		69,800
Common Shares		164,000		164,000
Cost of Goods Sold		414,500		414,500
Depreciation Expense		0		23,300
Dividends		29,400		29,400
Equipment		105,700		105,700
Insurance Expense		0		7,050
Interest Expense		2,050		10,950
Interest Income		4,100		4,100
Interest Payable		0		8,900
Inventory		75,000		75,000
Mortgage Payable		82,200		82,200
Prepaid Insurance		9,400		2,350
Property Tax Expense		0		4,750
Property Tax Payable		0		4,750
Retained Earnings		15,600		15,600
Salaries and Wages Expense		108,100		108,100
Sales Commission Expense		11,850		15,600
Sales Commission Payable		0		3,750
Sales Returns and Allowances		8,500		8,500
Sales Revenue		698,000		698,000
Utilities Expense		10,000		10,000

Analysis reveals the following additional information:

1.		Insurance expense and utilities expense are 70% selling and 30% administrative.
2.		In the next year, $20,550 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 $32,800 of the salaries and wages expense related to office salaries and the remainder related to sales salaries. Depreciation expense includes $9,900 relating to the building and $13,400 relating to equipment.

Prepare a multiple-step income statement. (List selling expenses before administrative expenses and other revenues and gains before other expenses and losses.)

Answer 1

			Income statement
					$	$
	Sales revenue					698000
	Less: Sales returns and allowances					8500
	Net sales					689500
	Less: Cost of goods sold					414500
	gross profit					283500
	Selling expenses:
	Depreciation expense				13400
	Insurance expense			(7050*70%)	2115
	Salaries and Wages Expense			(108100-32800)	75300
	Sales Commission Expense				15600
	Utilities expense			(10000*70%)	7000	-113415
	Administrative expense:
	Depreciation expense				9900
	Insurance expense			(7050*30%)	2115
	Property tax expense				4750
	Salaries and Wages Expense				32800
	Utilities expense			(10000*30%)	3000	-52565
	Other revenues and gains:
	Interest income				4100	4100
	Other expenses and losses:
	Interest Expense				10950	-10950
	Net income					110670