Problem 5-5A Simon Company SIMON COMPANY

Problem 5-5A Simon Company SIMON COMPANY

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Problem 5-5A Simon Company SIMON COMPANY Income Statement For the Year Ended December 31, 2017 289 289

Preparing a Multiple‐Step Income Statement

Purpose of Assignment

The purpose of this assignment is to help you become familiar with the parts of the multiple‐step incomestatement.

Assignment Steps

ResourcesFinancial AccountingTools for Business Decision Making

ScenarioAn inexperienced accountant prepared this condensed income statement for SimonCompany, a retail firm that has been in business for a number of years.

SIMON COMPANY

Income Statement
For the Year Ended December 31, 2017

 

Revenues

 

Net sales

$850,000

Other revenues

22,000

 

872,000

Cost of goods sold

555,000

Gross profit

317,000

Operating expenses

 

Selling expenses

109,000

Administrative expenses

103,000

 

212,000

Net earnings

$105,000

As an experiencedknowledgeable accountantyou review the statement and determine the followingfacts:

1. Net sales consist ofsales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances$28,000.
2. Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
3. Selling expenses consist of salespersonssalaries $80,000, depreciation on equipment $10,000, advertising $13,000, and sales commissions $6,000. The commissions represent commissions paidAt December 21, $3,000 ofcommissions have been earned by salespersons but have not been paidAll compensation should be recorded asSalaries and Wages Expense.
4. Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense$2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018.

Prepare a detailed multi-step income statement with a brief explanation of 700 wordsAssume a 25% tax rate.

Show your work on the Excel® spreadsheet and submit with your explanation.


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