Question

An inexperienced accountant prepared this condensed income statement for Sundberg Company, a retail firm that has been in business for a number of years.
SUNDBERG COMPANY
Income Statement
For the Year Ended December 31, 2014
Revenues
Net sales......... $850,000
Other revenues........ 22,000
.............. 872,000
Cost of goods sold...... 555,000
Gross profit........ 317,000
Operating expenses
Selling expenses ......... 109,000
Administrative expenses..... 103,000
............... 212,000
Net earnings........ $105,000

As an experienced, knowledgeable accountant, you review the statement and determine the following facts.
1. Net sales consist of sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000.
2. Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
3. Selling expenses consist of salespersons’ salaries $80,000; depreciation on equipment
$10,000; advertising $13,000; and sales commissions $6,000. The commissions represent commissions paid. At December 31, $3,000 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense.
4. Administrative expenses consist of office salaries $47,000; dividends $18,000; utilities $12,000; interest expense $2,000; and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2015.

Instructions
Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate.



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  • CreatedApril 07, 2014
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