Cash $ 92,000 Sales $9,175,000
Accounts Receivable 450,000 Sales Returns and Allowances 160,000
Merchandise Inventory 375,000 Sales Discounts 90,000
Office Supplies 10,000 Cost of Merchandise Sold 5,620,000
Prepaid Insurance 12,000 Sales Salaries Expense 850,000
Office Equipment 220,000 Advertising Expense 420,000
Accumulated Depreciation— Depreciation Expense—
Office Equipment 58,000 Store Equipment 33,000
Store Equipment 650,000 Miscellaneous Selling Expense 18,000
Accumulated Depreciation— Office Salaries Expense 540,000
Store Equipment 87,500 Rent Expense 48,000
Accounts Payable 48,500 Insurance Expense 24,000
Salaries Payable 4,000 Depreciation Expense—
Note Payable Office Equipment 10,000
(final payment due 2032) 140,000 Office Supplies Expense 4,000
Gerri Faber, Capital 431,000 Miscellaneous Administrative Exp. 6,000
Gerri Faber, Drawing 300,000 Interest Expense 12,000
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 $7,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report-form and account-form balance sheets differ.
Answer:
1.
KANPUR CO.
Income Statement
For the Year Ended June 30, 2014
Revenue from sales:
Sales $9,175,000
Less: Sales returns and allowances $160,000
Sales discounts 90,000 250,000
Net sales $8,925,000
Cost of merchandise sold 5,620,000
Gross profit $3,305,000
Expenses:
Selling expenses:
Sales salaries expense $850,000
Advertising expense 420,000
Depreciation expense—store
equipment 33,000
Miscellaneous selling expense 18,000
Total selling expenses $1,321,000
Administrative expenses:
Office salaries expense $540,000
Rent expense 48,000
Insurance expense 24,000
Depreciation expense—office
equipment 10,000
Office supplies expense 4,000
Miscellaneous administrative expense 6,000
Total administrative expenses 632,000
Total operating expenses 1,953,000
Income from operations $1,352,000
Other expense:
Interest expense 12,000
Net income $1,340,000
2.
KANPUR CO.
Statement of Owner’s Equity
For the Year Ended June 30, 2014
Gerri Faber, capital, July 1, 2013 $ 431,000
Net income for the year $1,340,000
Less withdrawals 300,000
Increase in owner’s equity 1,040,000
Gerri Faber, capital, June 30, 2014 $1,471,000
3.
KANPUR CO.
Balance Sheet
June 30, 2014
Assets
Current assets:
Cash $ 92,000
Accounts receivable 450,000
Merchandise inventory 375,000
Office supplies 10,000
Prepaid insurance 12,000
Total current assets $ 939,000
Property, plant, and equipment:
Office equipment $220,000
Less accumulated depreciation 58,000 $162,000
Store equipment $650,000
Less accumulated depreciation 87,500 562,500
Total property, plant, and equipment 724,500
Total assets $1,663,500
Liabilities
Current liabilities:
Accounts payable $ 48,500
Salaries payable 4,000
Note payable (current portion) 7,000
Total current liabilities $ 59,500
Long-term liabilities:
Note payable (final payment due 2032) 133,000
Total liabilities $ 192,500
Owner’s Equity
Gerri Faber, capital 1,471,000
Total liabilities and owner’s equity $1,663,500
4. a. The multiple-step form of income statement contains various sections for
revenues and expenses, with intermediate balances, and concludes with
net income. In the single-step form, the total of all expenses is deducted
from the total of all revenues. There are no intermediate balances.
b. In the report form of balance sheet, the assets, liabilities, and owner’s
equity are presented in that order in a downward sequence. In the
account form, the assets are listed on the left-hand side, and the liabilities
and owner’s equity are listed on the right-hand side.