On Sheridan s Multiple step Income Statement for 2017 Income From Continuing Operations is
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Question 4P-A
Expert-verified
Found in: Page 187
Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201
Short Answer
The following account balances were included in the trial balance of Twain Corporation at June 30, 2017.
Sales revenue $1,578,500
Depreciation expense (office furniture and equipment) $7,250
Sales discounts $31,150
Cost of goods sold $896,770
Property tax expense $7,320
Salaries and wages expense (sales) $56,260
Bad debt expense (selling) $4,850
Sales commissions $97,600
Maintenance and repairs expense (administration) $9,130
Travel expense (salespersons) $28,930
Delivery expense $21,400
Office expense $6,000
Entertainment expense $14,820
Sales returns and allowances $62,300
Telephone and Internet expense (sales) $9,030
Dividends received $38,000
Depreciation expense (sales equipment) $4,980
Interest expense $18,000
Maintenance and repairs expense (sales) $6,200
Income tax expense $102,000
Miscellaneous selling expenses $4,715
Depreciation understatement due to error—2014 (net of tax) $17,700
Office supplies used $3,450
Telephone and Internet expense (administration) $2,820
Dividends declared on preferred stock $9,000
Dividends declared on common stock $37,000
The Retained Earnings account had a balance of $337,000 at July 1, 2016. There are 80,000 shares of common stock outstanding.
Instructions
(a) Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2017.
The net income of the company is $221,525.
The balance in the statement of retained earnings is $494,825.
See the step by step solution
Step by Step Solution
Meaning of Multi-Step Income Statement
A multi-step income statement follows a specific format to present the revenues and expenses of a business concern. It represents the operating and non-operating earnings and expenses separately.
Preparation of multi-step income statement
| In the books of Twain Corporation Multi-step Income Statement For the year ended June 30, 2017 | ||
| Particulars | Details | Amounts ($) |
| Sales revenue | 1,578,500 | |
| Less: Sales discount | 31,150 | |
| Less: Sales returns and allowances | 62,300 | (93,450) |
| Net sales | 1,485,050 | |
| Less: Cost of goods sold | (896,770) | |
| Gross profit | 588,280 | |
| Operating expenses | ||
| Sales commissions | 97,600 | |
| Salaries and wages | 56,260 | |
| Travel expense | 28,930 | |
| Delivery expense | 21,400 | |
| Entertainment expense | 14,820 | |
| Telephone and internet expense | 9,030 | |
| Maintenance and repairs expense | 6,200 | |
| Depreciation expense | 4,980 | |
| Bad debt expense | 4,850 | |
| Miscellaneous selling expense | 4,715 | (248,785) |
| Administrative expenses | ||
| Maintenance and repair expense | 9,130 | |
| Property tax expense | 7,320 | |
| Depreciation expense | 7,250 | |
| Supplies expense | 3,450 | |
| Telephone and internet expense | 2,820 | |
| Miscellaneous office expenses | 6,000 | (35,970) |
| Operating income | 303,525 | |
| Other gains and revenues | ||
| Dividend revenue | 38,000 | |
| Other expenses and losses | ||
| Interest expense | (18,000) | |
| Income before tax | 323,525 | |
| Less: Income tax expense | (102,000) | |
| Net income | $221,525 | |
| Earnings per share ($221,525-9000)/80000 | $2.66 |
Preparation of retained earnings statement
| In the books of Twain Corporation Retained Earnings Statement For the year ended June 30, 2017 | |
| Particulars | Amounts ($) |
| Balance as on July 1, 2016 | 337,000 |
| Correction of depreciation understatement | (17,700) |
| Add: Net income | 221,525 |
| Less: Dividend declared on preferred stock | (9,000) |
| Less: Dividend declared on common stock | (37,000) |
| Balance as on June 30, 2017 | $494,825 |
Most popular questions for Business-studies Textbooks
Question: At December 31, 2016, Shiga Naoya Corporation had the following stock outstanding.
10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000
Common stock, $5 par, 4,000,000 shares 20,000,000
During 2017, Shiga Naoya did not issue any additional common stock. The following also occurred during 2017.
Income from continuing operations before taxes $23,650,000
Discontinued operations (loss before taxes) $3,225,000
Preferred dividends declared $1,075,000
Common dividends declared $2,200,000
Effective tax rate 35%
Instructions
Compute earnings per share data as it should appear in the 2017 income statement of Shiga Naoya Corporation. (Round to two decimal places.)
Question: Below is the Retained Earnings account for the year 2017 for Acadian Corp.
Retained earnings, January 1, 2017 $257,600
Add:
Gain on sale of investments (net of tax) $41,200
Net income 84,500
Refund on litigation with government, related to
the year 2014 (net of tax) 21,600
Recognition of income earned in 2016, but omitted
from income statement in that year (net of tax) 25,400 172,700
430,300
Deduct:
Loss on discontinued operations (net of tax) 35,000
Write-off of goodwill (net of tax) 60,000
Cumulative effect on income of prior years in changing
from LIFO to FIFO inventory valuation in 2017 (net of tax) 23,200
Cash dividends declared 32,000 150,200
Retained earnings, December 31, 2017 $280,100
Instructions
(b) State where the items that do not appear in the corrected retained earnings statement should be shown
Recommended explanations on Business-studies Textbooks
Source: https://www.studysmarter.us/textbooks/business-studies/intermediate-accounting-kieso-16th/income-statement-and-related-information/question-4p-a-the-following-account-balances-were-included-i/
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