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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Multiple-step income statement and report form of balance sheet

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2016:

Chapter 6, Problem 6.5APR, Multiple-step income statement and report form of balance sheet The following selected accounts and

Instructions

1. Prepare a multiple-step income statement.

2. Prepare a statement of owner’s equity.

3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $50,000.

4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report-form and account-form balance sheets 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, 2016.

Explanation

The following is the income statement of Company C.

Company C

Income Statement

For the Year Ended May 31, 2016

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
Administrative Expenses

(2)

To determine

To Prepare: The statement of owner’s equity of Company C for the year ended May 31, 2016.

(3)

To determine

To Prepare: The balance sheet of Company C for the year ended May 31, 2016.

4. (a)

To determine

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

(b)

To determine

To Explain: The difference between report-form and account form balance sheet.

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