Question

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018 Cash Accounts receivable Inventory Estimated returns inventory Office supplies Prepaid insurance Office equipment Accumulated depreciation-office equipment Store equipment Accumulated depreciation-store equipment Accounts payable Customer refunds payable Salaries payable Note payable (final payment due 2024) Common stock Retained earnings Dividends Sales $238,400 960,300 1,644,400 20,900 22,200 15,100 825,800 551,100 3,603,000 1,819,400 356,700 48,800 44,900 285,000 507,300 2,822,800 108,200 11,405,100

Answer 1

1. Prepare multiple-step income statement as follows Income Statement For the year ended may 31, 2018 Particulars Amount (S) S11,405,100 Sales Cost of goods sold Gross profit Selling expenses: Sales salaries expense S7,856,600 S3.548,500 S908,400 $545,800 $142,200 $41,000 Advertising expense Depreciation expense - store equipment Miscellaneous selling expense Total selling expenses Administrative expenses: S1,637,400 $651,300 $90,800 S40,700 $47,600 $35,000 $15,200 Office salaries expense Rent expense Depreciation expense - office equipment Insurance expense Office supplies expense Miscellaneous administrative expenses Total administrative expenses Total operating expenses Income from operations Other revenue and expense Interest expense Net income S880,600 S2518,000 S1,030,500 -$28,200 $1,002,300 2. Prepare retained earnings statement as follows Retained Earnings Statement For the year ended May 31, 2018 Amount (S) Particulars Retained earings, June 1, 2017 Add: net income for the year Less: dividends Retained earnings, May 31, 2018 $2,822,800 1,002,300 S894,100 S3,716,900 -$108,200

3 Prepare the balance sheet as follows Balance sheet on May 31, 2018 Amount (S) Assets Current assets: $238,400 S960,300 S1,644,400 S20,900 $22,200 $15,100 Cash Accounts receivable Inventory Estimated returns inventory Office supplies Prepaid Insurance Total current assets Property, plant and equipment: Store Equipment Less: accumulated depreciation - store equipment Office equipment Less: accumulated depreciation - office equipment Total property, plant and equipment Total assets $2,901,300 S3,603,000 -$1,819,400 S825,800 -$551,100 S2,058,300 $4,959,600 Liabilities Current liabilities S356,700 $48,800 $44,900 S56,000 Accounts payable Customer refunds payable Salaries payable Note payable (current portion) Total current liabilities |Long-term liabilities: Note payable |Total liabilities |Stockholder's equity S506,400 S229,000 S735,400 Common stock $507,300 Retained earnings |Total stockholder's equity Total liabilities and stockholders' equity S3,716,900 $4,224,200 $4,959,600

4(a) A multiple-step type income statement shows intermediate balances. A multiple-step type income statement categorizes expenses as operational unlike single-step income statement. The operational cost includes indirect expenses and non-operational cost includes direct expenses. In first part of this statement cost of goods sold is reduced from the total revenue income to calculate gross profit, thereafter operating expenses is reduced to calculate operating profit. This type if income statement enables user to analyze the ratios of revenue, expenses and gross margins with each other easily operational and non- However, in a single step type income statement expenses are not categorized. 2 In such income statement simply, total of all revenue and gains are written at the top of the income statement thereafter all expenses are written and totaled at the bottom of the statement. At the end of the statement net income is calculated (the difference of al1 incomes less all expenses) 4(b) A report form type balance sheet presents assets, liabilities, and stockholder's equity in a downward sequence An account form of the balance sheet as its name suggest it prepared in form like ledger account, in such account form type balance sheet two columns are used one for assets (left side) and second for both liabilities and equity (right side) However, in report form of the balance sheet vertically assets and liabilities are reported, in such report form type balance sheet assets are first written and totaled thereafter liabilities and equity written and totaled.