Easley-O'Hara Office Equipment sells furniture and technology solutions to consumers and to businesses. Most consumers pay for their purchases with credit cards and business customers make purchases on open account with terms 1/10, net 30. Costs of furniture inventory purchases have generally been rising and costs of computer inventory purchases have generally been declining. The company's income tax rate is 20%. Casey Easley, the general manager, was particularly interested in the financial statement effects of the following facts related to first quarter operations. a. Credit card sales (discount 2%) were $32,500. b. Sales on account were $90,000. The company expects one-half of the accounts to be paid within the discount period. c. The company computed cost of goods sold for the transactions in (a) and (b) above under FIFO and LIFO for its two product lines and chose the method for each product that minimizes income taxes: Furniture Computer equipment FIFO $26,000 31,000 LIFO $29,000 27,000 d. During the period, the company wrote off $1,100 worth of bad debts. e. At the end of the period, the company estimated that 1.5% of gross sales on account would prove to be uncollectible. f. Costs to deliver furniture to customers were $4,000. g. Rent, utilities, salaries, and other operating expenses were $21,000. h. At the end of the period, the company discovered that the net realizable value of ending Inventory was $900 less than original cost. Required: Complete the following table, indicating the effects of each transaction on each income statement line item or subtotal listed. Indicate the amount and use a minus sign for a decrease; leave the space blank for no effect. (Hint: Remember that any item that affects revenues or expenses also affects Income Tax Expense by the amount of the revenue or expense times the income tax rate.) When you are done, sum across the columns to produce Easley-O'Hara's income statement for the quarter. Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Income before income taxes Income tax expense Net income a. b. C. d. Transaction e. f. g. h. Income Statement

Easley-O'Hara Office Equipment sells furniture and technology solutions to consumers and to businesses. Most consumers pay for their purchases with credit cards and business customers make purchases on open account with terms 1/10, net 30. Costs of furniture inventory purchases have generally been rising and costs of computer inventory purchases have generally been declining. The company's income tax rate is 20%. Casey Easley, the general manager, was particularly interested in the financial statement effects of the following facts related to first quarter operations. a. Credit card sales (discount 2%) were $32,500. b. Sales on account were $90,000. The company expects one-half of the accounts to be paid within the discount period. c. The company computed cost of goods sold for the transactions in (a) and (b) above under FIFO and LIFO for its two product lines and chose the method for each product that minimizes income taxes: Furniture Computer equipment FIFO $26,000 31,000 LIFO $29,000 27,000 d. During the period, the company wrote off $1,100 worth of bad debts. e. At the end of the period, the company estimated that 1.5% of gross sales on account would prove to be uncollectible. f. Costs to deliver furniture to customers were $4,000. g. Rent, utilities, salaries, and other operating expenses were $21,000. h. At the end of the period, the company discovered that the net realizable value of ending Inventory was $900 less than original cost. Required: Complete the following table, indicating the effects of each transaction on each income statement line item or subtotal listed. Indicate the amount and use a minus sign for a decrease; leave the space blank for no effect. (Hint: Remember that any item that affects revenues or expenses also affects Income Tax Expense by the amount of the revenue or expense times the income tax rate.) When you are done, sum across the columns to produce Easley-O'Hara's income statement for the quarter. Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Income before income taxes Income tax expense Net income a. b. C. d. Transaction e. f. g. h. Income Statement

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter8: Revenue Recognition, Receivables, And Advances From Customers

Section: Chapter Questions

Problem 18E

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