ACCTG311 Chapter Notes - Chapter 4: Share Capital, Accounts Receivable, Accounts Payable
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Multiple-Step Income Statement
The Carlsbad Company income statement for the year ended February 28, 20Y8 contains errors:
CARLSBAD COMPANY | |||||||||
Income Statement | |||||||||
For the Year Ended February 28, 20Y8 | |||||||||
Sales | $4,220,000 | ||||||||
Cost of goods sold | (2,650,000) | ||||||||
Operating income | $1,930,000 | ||||||||
Expenses: | |||||||||
Selling expenses | $ 800,000 | ||||||||
Administrative expenses | 600,000 | ||||||||
Delivery expense | 50,000 | ||||||||
Total expenses | (1,450,000) | ||||||||
Other expense: | 480,000 | ||||||||
Interest revenue | 40,000 | ||||||||
Gross profit | 440,000 |
Prepare a corrected income statement for Carlsbad Company for the year ended February 28, 20Y8.
Carlsbad Company | |||
Income Statement | |||
For the Year Ended February 28, 20Y8 Sales Cost of goods sold Gross profit Expenses: Selling expenses Administrative expenses Delivery expense Total expenses Operating income Other revenue: Interest revenue Net income |
Multi-step Income Statement and Adjusting Entries
Oregon Distributors, whose accounting year ends on December 31, hadthe following normal balances in its ledger accounts at December31.
Cash | $36,080 |
Accounts Receivable | 101,200 |
Inventory | 90,200 |
Prepaid Insurance | 7,920 |
Office Supplies | 5,280 |
Furniture & Fixtures | 30,800 |
Accumulated Depreciation - Furn. & Fixtures | 11,880 |
Delivery Equipment | 77,000 |
Accumulated Depreciation - Delivery Equipment | 26,840 |
Accounts Payable | 76,340 |
Long-term Notes Payable | 33,000 |
Common Stock | 110,000 |
Retained Earnings | 46,200 |
Sales Revenue | 1,269,400 |
Cost of Goods Sold | 903,320 |
Utilities Expense | 9,460 |
Sales Salaries Expense | 119,000 |
Delivery Expense | 40,480 |
Advertising Expense | 28,820 |
Rent Expense | 33,000 |
Income Tax Expense | 12,100 |
Office Salaries Expense | 79,000 |
During the year, the accounting department prepared monthlystatements but no adjusting entries were made in the journals andledgers. Data for the year-end procedures are as follows:
Prepaid Insurance, December 31 | $2,400 |
Depreciation Expense on furniture and fixures for year | 2,100 |
Depreciation Expense on delivery equip. for the year | 11,000 |
Salaries Payable, December 31 | 1,600 |
Office Supplies on hand, December 31 | 1,800 |
Required
a. Record the necessary adjusting entries at December 31.
b. Prepare a multi-step income statement for the year. Combine allthe operating expenses into one line on the income statement forselling, general and administrative expenses.
a.
GeneralJournal | |||||
---|---|---|---|---|---|
Date | Description | Ref. | Debit | Credit | |
Dec. | 31 | AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | 1 | Answer | Answer |
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furniture & FixturesCashCommon StockCost ofGoods SoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
To record expired insurance. | |||||
31 | AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | 2 | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
To record depreciation expense for furniture for theyear. | |||||
31 | AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | 3 | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
To record depreciation expense for delivery equip. for theyear. | |||||
31 | Sales Salaries Expense | 4 | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsOffice SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
To record accrued salaries at December 31. | |||||
31 | AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | 5 | Answer | Answer | |
AnswerAccounts PayableAccounts ReceivableAccumulatedDepreciation - Furn. & FixturesCashCommon StockCost of GoodsSoldAccumulated Depreciation - Delivery EquipmentDepreciationExpense - Delivery EquipmentDepreciation Expense - Furniture &FixturesFurniture & FixturesIncome Tax ExpenseInsuranceExpenseInventoryLong-Term Notes PayableOffice SuppliesOfficeSupplies ExpensePrepaid InsuranceRetained EarningsSales SalariesExpenseSalaries PayableSales RevenueSelling, General andAdministrative Expenses | Answer | Answer | |||
To record office supplies used. |
b. Do not use negative signs with your answers.
OREGONDISTRIBUTORS Income Statement For the Year Ended December 31 | |
---|---|
AnswerSales RevenueCost of Goods SoldSelling, General, andAdministrative ExpenseIncome Tax Expense | $Answer |
AnswerSales RevenueCost of Goods SoldSelling, General, andAdministrative ExpenseIncome Tax Expense | Answer |
Gross Profit on Sales | Answer |
Operating Expenses | |
AnswerSales RevenueCost of Goods SoldSelling, General, andAdministrative ExpenseIncome Tax Expense | Answer |
Income before Income Taxes | Answer |
AnswerSales RevenueCost of Goods SoldSelling, General, andAdministrative ExpenseIncome Tax Expense | Answer |
Net Income | $Answer |
Need help completing an income statement!
Trial Balance:
Acc. # | Account Name | Debits | Credits |
100 | Cash | $ 66,000 | |
110 | Accounts receivable | 160,000 | |
115 | Allowance for doubtful accounts | $ 7,000 | |
120 | Inventory | 50,000 | |
135 | Prepaid insurance | 24,750 | |
136 | Prepaid advertising | 6,000 | |
150 | Land | 235,000 | |
160 | Building | 240,000 | |
165 | Accumulated depreciation - building | 61,500 | |
170 | Equipment | 150,000 | |
175 | Accumulated depreciation - equipment | 53,750 | |
190 | Notes receivable | 155,000 | |
195 | Interest receivable | 8,590 | |
200 | Accounts payable | 135,000 | |
215 | Interest payable | 11,000 | |
219 | Income tax payable | 12,477 | |
230 | Accrued liabilities | 42,000 | |
240 | Unearned revenue | 27,500 | |
250 | Notes payable - current portion | 20,000 | |
255 | Notes payable - long-term portion | 80,000 | |
270 | Bonds payable | 100,000 | |
300 | Common stock | 500,000 | |
310 | Retained earnings | 21,000 | |
350 | Dividends | 5,000 | |
400 | Sales | 1,337,250 | |
450 | Interest revenue | 94,590 | |
500 | Cost of goods sold | 616,000 | |
510 | Administrative and general expenses | 97,000 | |
515 | Insurance expense | 2,250 | |
520 | Selling expenses | 188,000 | |
531 | Depreciation expense - building | 7,500 | |
532 | Depreciation expense - equipment | 12,500 | |
550 | Interest expense | 71,000 | |
599 | Income tax expense | 12,477 | |
600 | Loss on sale of equipment | 60,000 | |
910 | Loss from operation of discontinued | 75,000 | |
segment ofbusiness | |||
915 | Loss from disposal of discontinued | 261,000 | |
segment ofbusiness | |||
$ 2,503,067 | $ 2,503,067 |
Income statement: (I've put in some of the numbers butI'm kinda lost with the operating expenses)
Sales | $ 1,337,250 | |
Cost of goods sold | 616,000 | |
Gross Profit | 721,250 | |
Operating expenses | ||
Selling expenses | 188,000 | |
Administrative and generalexpenses | ||
Total operating expenses | ||
Operating Income | ||
Other revenue | ||
Interest Revenue | 94,590 | |
Other expense and loss | ||
Interest expense | ||
Total other expense andloss | ||
Income from continuingoperations before income tax | ||
Income tax expense | 113,277 | |
Income from continuingoperations | 264,313 | |
Discontinued operations: | ||
Loss fromoperations of discontinued segment, net of | ||
income tax benefit | ||
Loss from disposalof discontinued segment, net of | ||
income tax benefit | ||
Total loss from discontinuedoperations | ||
* = Line-item is a subtotal,not an account | ||
EPS: | ||