Question

CP6-4 Preparing a Multistep Income Statement with Sales Discounts and Sales Returns and Allowances and Computing the Gross Profit Percentage [LO 6-5]

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Psymon Company, Inc. sells construction equipment. The annual fiscal period ends on December 31. The following adjusted trial balance was created from the general ledger accounts on December 31:

Account Titles	Debits			Credits
Cash	$	59,810
Accounts Receivable		24,800
Inventory		90,500
Property and Equipment		67,000
Accumulated Depreciation				$	28,100
Liabilities					41,900
Common Stock					124,000
Retained Earnings, January 1					15,000
Sales Revenue					258,500
Sales Returns and Allowances		8,700
Sales Discounts		11,400
Cost of Goods Sold		138,800
Salaries and Wages Expense		23,800
Office Expense		24,800
Interest Expenses		3,700
Income Tax Expense		14,190
Totals	$	467,500		$	467,500

Required:

1.	Prepare a multistep income statement that would be used for internal reporting purposes. Treat Sales Discounts and Sales Returns and Allowances as contra-revenue accounts. TIP: Some of the accounts listed will appear on the balance sheet rather than the income statement.

2.	Prepare a multistep income statement that would be used for external reporting purposes, beginning with the amount for Net Sales.