Question

Multiple-step income statement and balance sheet Instructions Labels and Amount Descriptions Income Statement Retained Earnings Statement Balance Sheet Final Question Instructions Cash Accounts receivable Inventory Estimated returns inventory Office supplies Prepaid insurance Office equipment Accumulated depreciation-office equipment Store equipment Accumulated depreciation-store equipment Accounts payable Customer refunds payable Salaries payable Note payable (final payment due 2024) Common stock Retained earnings Dividends Sales Cost of goods sold Sales salaries expense Advertising expense Depreciation expense-store equipment Miscellaneous selling expense Office salaries expense Rent expense Depreciation expense-office equipment Insurance expense Office supplies expense Miscellaneous administrative expense Interest expense $ 240,000 966,000 1,690,000 22,500 13,500 8,000 830,000 550,000 3,600,000 1,820,000 326,000 40,000 41,500 300,000 500,000 2,949,100 100,000 11,343,000 7,850,000 916,000 550,000 140,000 38,000 650,000 94,000 50,000 48,000 28,100 14,500 21,000 Required: 1. Prepare a multiple-step income statement. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign." 2. Prepare a retained earnings statement. Negative amount should be indicated by the minus sign.* 3. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.* 4. Briefly explain how multiple-step and single-step income statements differ. * Be sure to complete the statement headings. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon

Answer 1

Solution:

1.) Clairemont Company

Income Statement

For the Year Ended May 31, 2018

Sales		$1,1343,000
Cost of goods sold		-$7,850,000
Gross profit		$3,493,000
Operating Expenses:
Selling Expenses:
Sales salaries expenses	$916,000
Advertising expenses	$550,000
Depreciation expense - store equipment	$140,000
Miscellaneous selling expenses	$38,000
Total selling expenses		-$1,644,000
Administrative Expenses:
Office salaries expenses	$650,000
Rent expenses	$94,000
Depreciation expense - office equipment	$50,000
Insurance expenses	$48,000
Office supplies expenses	$28,100
Miscellaneous administrative expenses	$14,500
Total administrative expenses		-$884,600
Total operating expenses		-$2,528,600
Income from operations		$964,400
Other income and expenses:
Interest expense	$21,000	- $21,000
Net income		$943,400

2.) Clairemont Company

Retained Earnings Statement

For the Year Ended May 31, 2018

Retained Earnings, June 1, 2017		$2,949,100
Net income	$943,400
Dividends	-$100,000
Increase in retained earnings		$843,400
Retained earnings, May 31, 2018		$3,792,500

3.) Clairemont Company

Balance Sheet

May 31, 2018

Assets:
Current Assets:
Cash		$240,000
Accounts receivable		$966,000
Inventory		$1,690,000
Estimated returns inventory		$22,500
Office supplies		$13,500
Prepaid insurance		$8,000
Total current assets			$2,940,000
Property, plant and equipment:
Office equipment	$830,000
Accumulated depreciation - office equipment	- $550,000
Store equipment	$3,600,000
AcumuAccumu depreciation - store equipment	- $1,820,000
Total property,plant and equipment	($280,000+ $1,780,000)		$2,060,000
Total assets			$5,000,000
Liabilities:
Current liabilities:
Accounts payable		$326,000
Customer refunds payable		$40,000
Salaries payable		41,500
Note payable (current portion)		$50,000
Total current liabilities			$457,500
Long term liabilities:
Note payable (final payment due 2024)			250,000
Total liabilities			$707,500
Stockholders' Equity:
Common stock		$500,000
Retained earnings		$3,792,500
Total stockholders'equity			$4,292,500
Total liabilities and stockholders'equity			$5,000,000

4.)

The multiple - step form of income statement contains various sections for revenue, expenses , with intermediate balance and conclude with net income. In other words, multiple step income statement is prepared by with each explanation. So it shows intermediate balance.

But, in the single step income statement, the total of all expenses is deducted from the total of all revenues. So, it is not show intermediate balance.