1.
Prepare separate schedule for selling expense and general administrative for Company C.
1.
Explanation of Solution
Schedule of selling expenses is a report which reports selling expenses in a detailed manner.
Prepare a schedule for Company C’s selling expense.
Company C | ||
Selling expenses | ||
For the year ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
$8,500 | ||
Advertising expense | $14,100 | |
Sales supplies expense | $4,600 | |
Sales salaries expense | $16,500 | |
Transportation-out | $6,000 | |
Total selling expenses | $49,700 |
Table (1)
Therefore, selling expenses of Company C is $49,700.
Schedule of selling expenses is a report which reports selling expenses in a detailed manner.
Prepare a schedule for general and administrative expenses:
Company C | |
General and administrative expense | |
For the year ended December 31, 2016 | |
Particulars | Amount ($) |
Administrative and office salaries expense | $29,500 |
Property tax expense | $7,700 |
Office supplies expense | $1,800 |
$1,900 | |
Depreciation expense: building and office equipment | $10,000 |
Total general and administrative expenses | $50,900 |
Table (2)
Therefore, general and administrative expense is $50,900.
2.
Prepare a single step income statement for Company C.
2.
Explanation of Solution
Single-step income statement: It is an income statement format in which a single subtotal of all revenue items are listed in one column, and a single subtotal of all expense items including cost of goods sold are listed in another column. Thus, the subtotal of all expense items is deducted from the subtotal of all revenue items to arrive at the net income at the bottom of the statement.
Prepare a single-step income statement for Company C for the year ended December 31, 2016.
Company C | ||
Single-Step Income Statement | ||
For the Year Ended December 31, 2016 | ||
Particulars | Amount | Amount |
($) | ($) | |
Revenues: | ||
Sales (net of $5,200 discounts) | $361,500 | |
Dividend revenue | $900 | |
Gain on sale of sales equipment | $5,000 | |
Total revenues (A) | $367,400 | |
Expenses: | ||
Cost of goods sold | $191,200 | |
Selling expenses | $49,700 | |
General and administrative expenses | $50,900 | |
Interest expense | $4,900 | |
Loss from flood | $5,500 | |
Income tax expense (1) | $19,560 | |
Total expenses (B) | $321,760 | |
Income from continuing operations | $45,640 | |
Results from the discontinuing operations: | ||
Loss from operations of Division M (net of $2,640 income tax credit) | $6,160 | |
Loss on disposal of Division M (net of $2,250 income tax credit) | ($5,250) | ($11,410) |
Net income | $34,230 |
Table (3)
Components of income | Earnings per common share (11,000 shares) ($110,000/$10 par) | |
Income from continuing operation | $4.15 | |
Result from discontinuing operation | ($1.04) | |
Net income | $3.11 |
Table (4)
Working note (1): Calculate the income tax expense:
3.
Prepare the statement of
3.
Explanation of Solution
Statement of Retained Earnings: Statement of retained earnings shows, the changes in the retained earnings, and the income left in the company after payment of the dividends, for the accounting period.
Prepare the statement of retained earnings for the first 6 months:
Company C | ||
Statement of Retained Earnings | ||
For the year Ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Retained earnings, January 1, 2016 | 428,900 | |
Add: Net income | 34,230 | |
Subtotal | 463,130 | |
Less: Cash Dividends | (9,900) | |
Retained earnings at June 30, 2016 | $453,230 |
Table (5)
Therefore, retained earnings of Company C for the year ended December 31, 2016 is $453,230.
4.
Compute the net profit margin for the year 2016.
4.
Explanation of Solution
Profit margin ratio is used to determine the percentage of net income that is being generated per dollar of revenue or sales.
Compute the profit margin for 2016:
Therefore, net profit margin is 9.5%.
Company C’s net profit margin ratio is increased by 1.5 percentage points from 2015 to 2016. Therefore, is indicates to have a better control over its expenses in relation to its sales. But, it is better to compare the net profit margin based on the income from continuing operations, because Company C had many items on income statement with nonrecurring nature in 2016, which is not appeared in 2015 income statement.
Want to see more full solutions like this?
Chapter 5 Solutions
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
- The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019: Instructions 1. Prepare a multiple-step income statement. 2. Prepare a statement of owners equity. 3. Prepare a balance sheet, assuming that the current portion of the note payable is 50,000. 4. Briefly explain how multiple-step and single-step income statements differ.arrow_forwardHardys Landscape Services total revenue on account for 2018 amounted to 273,205. The company, which uses the allowance method, estimates bad debts at percent of total revenue on account. Required Journalize the following selected entries: 2012 Dec. 12Record services performed on account for E. E. Morton, 245. 31Record the adjusting entry for Bad Debts Expense. 31Record the closing entry for Bad Debts Expense. 2013 Feb. 18Write off the account of E. E. Morton as uncollectible, 245. Check Figure Adjusting entry amount, 1,366.03arrow_forwardThe following information is available for the first three years of operations for Swift Company: (file attached) Requirements : 1. Prepare a schedule comparing depreciation for financial reporting and tax purposes 2. Determine the deferred tax (asset) or liability at the end of 2018 3. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2019arrow_forward
- Safety First Company completed all of its October 31,2020 adjustments in preparation for preparing its financial statements which resulted in the following trial balance Other information: All accounts have normal balances $26,400 of the Notes payable balance is due by October 31, 2021 The final task in the year end process was to access the assets for impairment, which resulted in the following schedule Required: Prepare the entries to record any impairment losses at October 31, 2020. Assume the company recorded no impairment losses in the previous years Prepare a classified balance sheet at October 31, 2020 What is the impact on the financial statements of an impairment loss?arrow_forwardSelected account balances from the adjusted trial balance for Olinda Corporation as of its calendar year-end December 31 follow. Assume that the company's income tax rate is 40% for all items. Debit Credit a. Interest revenue b. Depreciation expense-Equipment Loss on sale of equipment C. d. Accounts payable e. Other operating expenses f. Accumulated depreciation-Equipment Gain from settlement of lawsuit h. Accumulated depreciation-Buildings Loss from operating a discontinued segment (pretax) Gain on insurance recovery of tornado damage Net sales g. i. j. k. 1. Depreciation expense-Buildings m. Correction of overstatement of prior year's sales (pretax) Gain on sale of discontinued segment's assets (pretax) Loss from settlement of lawsuit n. O. p. q. Income tax expense Cost of goods sold $ 34,400 26,250 106,800 18,650 52,400 16,400 24,150 ? 486,500 $ 14,400 44,400 72,000 44,400 175,300 29,520 1,002,500 36,000 Problem 17-6AA (Algo) Part 2 2a. What is the amount of income from continuing…arrow_forwardSoon after December 31, 2019, the auditor requested a depreciation schedule for trucks of Jarrett Trucking Company, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4 year period 2016 to 2019 inclusive. The following data were in the Trucks account as of January 1, 2016: 1. Next Level For eacl1 of the 4 years, calculate separately the increase or decrease in earnings arising from the company’s errors in determining or entering depreciation or in recording transactions affecting trucks. 2. Prove your work by one compound journal entry as of December 31, 2019; the adjustment of the Trucks account is to reflect the correct balances, assuming that the books have not been closed for 2019.arrow_forward
- The adjusted trial balance of Pacific Scientific Corporation on December 31, 2024, the end of the company's fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,106; cost of goods sold, $1,240; selling expense, $126; general and administrative expense, $105; interest expense, $40; and gain on sale of investments, $45. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare a single-step income statement. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). PACIFIC SCIENTIFIC CORPORATION Income Statement For the Year Ended December 31, 2024 Revenue and gains: Sales revenue Total revenues and gains Expenses and losses: Cost of goods sold Selling expense General and administrative expense Interest expense Total expenses and losses Income before income taxes Income tax expense Net income 2,106 126 105 40 $ 2,106 2,106 2,422 (316) (160) 480arrow_forwardThe adjusted trial balance of Pacific Scientific Corporation on December 31, 2024, the end of the company's fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,150; cost of goods sold, $1,360; selling expense, $175; general and administrative expense, $165; interest expense, $40; and gain on sale of investments, $90. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare a multiple-step income statement. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Gross profit Operating expenses: PACIFIC SCIENTIFIC CORPORATION Income Statement For the Year Ended December 31, 2024 Total operating expenses Operating income Other income (expense): Total other income, net Income before income taxes 0 0 0 0 < Prev 2 of 5 ‒‒ Nextarrow_forwardThe adjusted trial balance of Pacific Scientific Corporation on December 31, 2024, the end of the company's fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,160; cost of goods sold, $1,340; selling expense, $165; general and administrative expense, $155; interest expense, $30; and gain on sale of investments, $70. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare a multiple-step income statement. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). PACIFIC SCIENTIFIC CORPORATION Income Statement For the Year Ended December 31, 2024 Gross profit Operating expenses: Total operating expenses Operating income Other income (expense): Total other income, net Income before income taxes Net incomearrow_forward
- The adjusted trial balance of Pacific Scientific Corporation on December 31, 2024, the end of the company's fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,135; cost of goods sold, $1,310; selling expense, $150; general and administrative expense, $140; interest expense, $65; and gain on sale of investments, $90. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare a multiple-step income statement. Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Sales revenue PACIFIC SCIENTIFIC CORPORATION Income Statement For the Year Ended December 31, 2024 Gross profit Operating expenses: Answer is not complete. Inventory Selling expense General and administrative expense Total operating expenses Operating income Other income (expense): Gain on sale of investments Interest expense Total other income, net Income before income taxes Income tax expense Net income 1,310 150 140 90 65 X 69 2,135…arrow_forwardThe adjusted trial balance of Pacific Scientific Corporation on December 31, 2021, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,106; cost of goods sold, $1,240; selling expense, $126; general and administrative expense, $105; interest expense, $40; and gain on sale of investments, $45. Income tax expense has not yet been recorded. The income tax rate is 25%. Using the account balances, prepare a single-step income statement for 2021.arrow_forwardThe adjusted trial balance of Pacific Scientific Corporation on December 31, 2021, the end of the company's fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,106; cost of goods sold, $1,240; selling expense, $126; general and administrative expense, $105; interest expense, $40; and gain on sale of investments, $45. Income tax expense has not yet been recorded. The income tax rate is 25%. Prepare a multiple-step income statement for 2021. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)arrow_forward
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning