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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Multiple-step income statement and balance sheet

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31. 2019:

Cash $240,000
Accounts Receivable 966,000
Merchandise Inventory 1,690,000
Estimated Returns Inventory 22,500
Office Supplies 13,500
Prepaid Insurance 8,000
Office Equipment 830,000
Accumulated Depreciation—  
Office Equipment 550,000
Store Equipment 3,600,000
Accumulated Depreciation—  
Store Equipment 1,820,000
Accounts Payable 326,000
Customer Refunds Payable 40,000
Salaries Payable 41,500
Note Payable  
(final payment due 2022) 300,000
Kristina Marble, Capital 3,449,100
Kristina Marble, Drawing $ 100,000
Sales 11,343,000
Cost of Merchandise Sold 7,850,000
Sales Salaries Expense 916,000
Advertising Expense 550,000
Depreciation Expense—  
Store Equipment 140,000
Miscellaneous Selling Expense 38,000
Office Salaries Expense 650,000
Rent Expense 94,000
Depreciation Expense-  
Office Equipment 50,000
Insurance Expense 48,000
Office Supplies Expense 28,100
Miscellaneous Administrative Exp. 14,500
Interest Expense 21,000

Instructions

1.    Prepare a multiple-step income statement.

2.    Prepare a statement of owner’s 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.

(1)

To determine

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 Prepare: The income statement of Company C for the year ended May 31, 2019.

Explanation

The following is the income statement of Company C.

Company C

Income Statement

For the Year Ended May 31, 2019

Particulars Amount ($) Amount ($)
Sales 11,343,000
Less: Cost of merchandise sold 7,850,000
Gross profit 3,493,000
Less: Operating Expenses:  
Selling Expenses:  
Sales and salaries expenses 916,000  
Advertising expenses 550,000  
Depreciation expense – store equipment 140,000  
Miscellaneous selling expense 38,000  
Total Selling Expenses 1,644,000...

(2)

To determine

To Prepare: The statement of owner’s equity of Company C for the year ended May 31, 2019.

(3)

To determine

To Prepare: The balance sheet of Company C for the year ended May 31, 2019.

(4)

To determine

To Explain: The difference between multiple-step and single-step income statements.

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