(1)
Multi step income statement: A multiple step income statement refers to the income statement that shows the operating, and non-operating activities of the business, under separate head. In different steps of the multi-step income statement, principal operating activities are reported that starts from the record of sales revenue with all contra sales revenue account like sales returns, allowances and sales discounts.
To Explain: Whether Company S use a periodic inventory system or perpetual inventory system.
(2)
To Prepare: The income statement of Company S for the year ended June 30, 2016.
3.
Closing entries: These refers to the
To Record: The closing entries of Company S.
4.
To Mention: The net income of W Company under the perpetual inventory system.
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FINANCIAL+MANG.-W/ACCESS PRACTICE SET
- Inventory Analysis The following account balances are taken from the records of Lewis Inc., a wholesaler of fresh fruits and vegetables: Required Compute Lewiss inventory turnover ratio for 2016 and 2015. Compute the number of days sales in inventory for 2016 and 2015. Assume 360 days in a year. Comment on your answers in parts (1) and (2) relative to the companys management of inventory over the two years. What problems do you see in its inventory management?arrow_forwardReid Company uses the periodic inventory system. On January 1, it had an inventory balance of 250,000. During the year, it made 613,000 of net purchases. At the end of the year, a physical inventory showed it had ending inventory of 140,000. Calculate Reid Companys cost of goods sold for the year.arrow_forwardContinuing problem Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account Balances for Palisade Creek Co. as of May 1, 2016 (unless otherwise indicated), are as follows: 110 Cash 83,600 112 Accounts Receivable 233,900 115 Merchandise Inventory 624,400 116 Estimated Returns Inventory 28,000 117 Prepaid Insurance 16,800 118 Store Supplies 11,400 123 Store Equipment 569,500 124 Accumulated DepreciationStore Equipment 56,700 210 Accounts Payable 96,600 211 Salaries Payable 212 Customers Refunds Payable 50,000 310 Common Stock 100,000 311 Retained Earnings 585,300 312 Dividends 135,000 313 Income Summary 410 Sales 5,069,000 510 Cost of Merchandise Sold 2,823,000 520 Sales Salaries Expense 664,800 521 Advertising Expense 281,000 522 Depreciation Expense 523 Store Supplies Expense 529 Miscellaneous Selling Expense 12,600 530 Office Salaries Expense 382,100 531 Rent Expense 83,700 532 Insurance Expense 539 Miscellaneous Administrative Expense 7,800 During May, the last month of the fiscal year, the following transactions were completed: May 1. Paid rent for May, 5,000. 3. Purchased merchandise on account from Martin Co. terms 2/10t n/30, FOB shipping point, 36,000. 4. Paid freight on purchase of May 3, 600. 6. Sold merchandise on account to Korman Co., terms 2/10, n/30, FOB shipping point, 68,500. The cost of the merchandise sold was 41,000. 7. Received 22,300 cash from Halstad Co. on account. 10. Sold merchandise for cash, 54,000. The cost of the merchandise sold was 32,000. 13. Paid for merchandise purchased on May 3- 15. Paid advertising expense for last half of May, 11,000. 16. Received cash from sale of May 6. 19. Purchased merchandise for cash, 18,700. 19. Paid 33,450 to Buttons Co. on account 20. Paid Korman Co. a cash refund of 13,230 for returned merchandise from sale of May 6. The invoice amount of the returned merchandise was 13,500 and the cost of the returned merchandise was 8,000. Record the following transactions on Page 21 of the journal: 20. Sold merchandise on account to Crescent Co., terms 1/10, n/30, FOB shipping point, 110,000. The cost of the merchandise sold was 70,000. 21. For the convenience of Crescent Co., paid freight on sale of May 20. 2,300. 21. Received 42,900 cash from Gee Co. on account. May 21. Purchased merchandise on account from Osterman Co., terms 1/10, n/30, FOB destination. 88,000. 24. Returned of damaged merchandise purchased on May 21, receiving a credit memo from the seller for 5,000. 26. Refunded cash on sales made for cash. 7,500. The cost of the merchandise returned was 4,800. 28. Paid sales salaries of 56,000 and office salaries of 29,000. 29. Purchased store supplies for cash, 2,400. 30. Sold merchandise on account to Turner Co., terms 2/10, n/30, FOB shipping point, 78,750. The cost of the merchandise sold was 47,000. 30. Received cash from sale of May 20 plus freight paid on May 21. 31. Paid for purchase of May 21. less return of May 24. Instructions 1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section, and place a check mark () in the Posting Reference column. Journalize the transactions for July, starting on Page 20 of the journal. 2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). a. Merchandise inventory on May 31 570,000 b. Insurance expired during the year 12,000 c. Store supplies on hand on May 31 4,000 d. Depreciation for the current year 14,000 e. Accrued salaries on May 31: Sales salaries 7,000 Office salaries 6,600 13,600 f. The adjustment for customer returns and allowances is 60,000 for sales and 35,000 for cost of merchandise sold. 5. (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a retained earnings statement, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both the Balance columns opposite the closing entry. Insert the new balance in the retained earnings account. 10. Prepare a post-closing trial balance.arrow_forward
- A partial work sheet for McKnight Music Store is presented here. The merchandise inventory at the beginning of the fiscal period was 48,473. W. J. McKnight, the owner, withdrew 40,000 during the year. Required 1. Prepare an income statement. 2. Journalize the closing entries. Check Figure Cost of Goods Sold, 192,521arrow_forwardEffects of an Inventory Error The income statements for Graul Corporation for the 3 years ending in 2019 appear below. During 2019, Graul discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly. a. A purchase return of inventory costing $42,000 was recorded twice. b. A credit purchase of inventory' made on December 20 for $28,500 was not recorded. The goods were shipped F.O.B. shipping point and were shipped on December 22, 2017. Required: 1. Was ending inventory for 2017 overstated or understated? By how much? 2. Prepare correct income statements for all 3 years. 3. CONCEPTUAL CONNECTION Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response. 4. CONCEPTUAL CONNECTION Why was the 2019 net income unaffected?arrow_forwardCost of Goods Sold and Income Statement Schuch Company presents you with the following account balances taken from its December 31 adjusted trial balance: Additional data: 1. A physical count reveals an ending-inventory of 22,500 on December 31. 2. Twenty-five thousand shares of common stock have been outstanding the entire year. 3. The income tax rate is 30% on all items of income. Required: 1. As a supporting document for Requirements 2 and 3, prepare a separate schedule for Schuchs cost of goods sold. 2. Prepare a multiple-step income statement. 3. Prepare a single-step income statement.arrow_forward
- Calculate the inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Has the company’s ability to manage its assets improved or worsened? Explain. A computer manufacturer has financial statements as follows: Income Statements for Year Ending December 31 (Thousands of Dollars) 2019 2018 Sales $945,000 $900,000 Expenses excluding depreciation and amortization 812,700 774,000 EBITDA $132,300 $126,000 Depreciation and amortization 33,100 31,500 EBIT $99,200 $94,500 Interest Expense 10,470 8,600 EBT $88,730 $85,900 Taxes (25%) 22,183 21,475 Net income $66,547 $64,425 Common dividends $56,609 $54,115 Addition to retained earnings $9,938 $10,310 Balance Sheets for Year Ending December 31 (Thousands of Dollars) Assets 2019…arrow_forwardhelp mearrow_forwardCurrent Attempt in Progress On November 1, 2025, Larkspur Inc. had the following account balances. The company uses the perpetual inventory method. Cash Accounts Receivable Supplies Equipment 10 11 12 15 19 20 22 During November, the following summary transactions were completed. 25 27 28 29 29 Debit 29 $16,200 29 4,032 1,548 45,000 Nov. 8 Paid $6,390 for salaries due employees, of which $3,330 is for November and $3,060 is for October. Received $3,420 cash from customers in payment of account. Purchased merchandise on account from Dimas Discount Supply for $14,400, terms 2/10, n/30. Sold merchandise on account for $9,900, terms 2/10, n/30. The cost of the merchandise sold was $7,200. Received credit from Dimas Discount Supply for merchandise returned $500. Received collections in full, less discounts, from customers billed on sales of $9,900 on November 12. Paid Dimas Discount Supply in full, less discount. Received $4,140 cash for services performed in November. Purchased equipment…arrow_forward
- Inventory Turnover and Days' Sales in Inventory The Southern Company installed a new inventory management system at the beginning of 2015. Shown below are data from the company's accounting records as reported out by the new system: 2015 2016 Sales Revenue Cost of Goods Sold 4,000,000 4,800,000 Beginning Inventory 510,000 53,000 Ending Inventory 530,000 600,000 $8,000,000 $11,000,000 Calculate the company's inventory turnover for 2015 and 2016. Round your answer to two decimal points. 2015 2016 Inventory turnoverarrow_forwardA fire destroys all of the merchandise of Assante Companyon February 10, 2017. Presented below is informationcompiled up to the date of the fire.Inventory, January 1, 2017 $ 400,000Sales revenue to February 10, 2017 1,950,000Purchases to February 10, 2017 1,140,000Freight-in to February 10, 2017 60,000Rate of gross profi t on selling price 40%What is the approximate inventory on February 10, 2017?arrow_forwardBlossom Company’s balance sheet at December 31, 2021, is presented below. Blossom CompanyBalance SheetDecember 31, 2021 Cash $13,600 Accounts payable $9,000 Accounts receivable 19,100 Owner’s capital 32,200 Allowance for doubtful accounts (900 ) Inventory 9,400 $41,200 $41,200 During January 2022, the following transactions occurred. Blossom uses the perpetual inventory method. Jan. 1 Blossom accepted a 4-month, 8% note from Merando Company in payment of Merando’s $1,200 account. 3 Blossom wrote off as uncollectible the accounts of Inwood Corporation ($400) and Goza Company ($300). 8 Blossom purchased $17,400 of inventory on account. 11 Blossom sold for $27,500 on account inventory that cost $17,700. 15 Blossom sold inventory that cost $800 to Mark Lauber for $1,400. Lauber charged this amount on his Visa First Bank card. The service fee charged Blossom by First Bank is 3%. 17…arrow_forward
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