Question

The information below pertains to the operations of Montreal Retail Corporation for the year ended 31 December 20X6:
Cost of merchandise sold ................ $ 102,000
Inventory warehousing cost................ 20,000
Accounts payable ................... 120,000
Sales revenue ..................... 525,000
Accumulated depreciation ................ 140,000
Sales returns ..................... 5,000
Unearned revenue ................... 2,000
Depreciation expense .................. 50,000
Rent revenue ...................... 4,000
Employee wages, salaries, and benefits.......... 100,000
Interest expense ................... 6,000
Investment revenue .................. 3,000
Loss on disposal of geographic segment .......... 30,000
Earnings from discontinued geographic segment...... 20,000
Distribution expenses .................. 106,000
General and administrative expenses............ 46,000
Loss on sale of noncurrent assets............. 13,000
Income tax expense ? Fire loss .............. 20,000
Additional information:
• Functional costs do not include depreciation or employee costs.
• Depreciation expense pertains 50% to warehousing cost, 30% to administrative costs, and 20% to distribution expense.
• Employee wages, salaries, and benefits pertain 20% to warehousing and merchandising, 50% to administrative costs, and 30% to distribution expense.
• The company’s income tax rate is 20%. Assume that the tax rate pertains to all elements of revenue, expense, gain, and loss.

Required:
1. Prepare an income statement on a functional basis, in a single- step format.
2. Prepare an income statement on the basis of nature of expense, using a multiple- step format.



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  • CreatedFebruary 17, 2015
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