Question

The following are selected ledger accounts of Swifty Corporation at December 31, 2017.

Cash		$186,850		Salaries and wages expense (sales)		$285,850
Inventory		536,850		Salaries and wages expense (office)		347,850
Sales revenue		4,276,850		Purchase returns		16,850
Unearned sales revenue		118,850		Sales returns and allowances		80,850
Purchases		2,787,850		Freight-in		73,850
Sales discounts		35,850		Accounts receivable		144,350
Purchase discounts		28,850		Sales commissions		84,850
Selling expenses		70,850		Telephone and Internet expense (sales)		18,850
Accounting and legal services		34,850		Utilities expense (office)		33,850
Insurance expense (office)		25,850		Miscellaneous office expenses		9,850
Advertising expense		55,850		Rent revenue		241,850
Delivery expense		94,850		Casualty loss (before tax)		71,850
Depreciation expense (office equipment)		49,850		Interest expense		177,850
Depreciation expense (sales equipment)		37,850		Common stock ($10 par)		901,850

Swifty’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is $687,850.

Prepare a condensed 2017 income statement for Swifty Corporation. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

SWIFTY CORPORATION
Income Statement
For the Year Ended December 31, 2017
Net Sales                                [Refer working note 1]		$4,160,150
Cost of Goods Sold                 [Refer working note 2]		$2,665,000
Gross Profit                             [$4,160,150 - $2,665,000]		$1,495,150
Selling Expenses                     [Refer working note 3]	($648,950)
Administrative Expenses        [Refer working note 4]	($502,100)
		($1,151,050)
Income From Operations                   [$1,495,150 - $1,151,050]		$344,100
Rent Revenue	$241,850
Interest Expense	($177,850)
Casualty loss	($71,850)
		($7,850)
Income Before Income Tax                  [$344,100 - $7,850]		$336,250
Income Tax Expense                              [$336,250 x 34%]		($114,325)
Net Income / (Loss)                             [$336,250 - $114,325]		$221,925
Earnings Per Share                               [$221,925 / 90,185 shares]		$2.46

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Working note 1 - Calculation of Net Sales
Sales revenue	$4,276,850
Less: Sales discounts	$35,850
Less: Sales returns and Allowances	$80,850
Net Sales	$4,160,150

.

.

Working note 2 - Calculation of cost of goods sold
Beginning inventory                            (a)		$536,850
Purchases	$2,787,850
Less: Purchase discounts	$28,850
Less: Purchase returns	$16,850
Net purchases                                   (b)		$2,742,150
Add: Frieght-in                                  (c)		$73,850
Cost of inventory available for sale   (a + b + c)		$3,352,850
Less: Ending inventory		$687,850
Cost of goods sold		$2,665,000

.

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Working note 3 - Calculation of selling expenses
Selling expenses                                            (a)	$70,850
Advertising expense                                     (b)	$55,850
Delivery expense                                          (c)	$94,850
Depreciation expense (sales equipment)   (d)	$37,850
Salaries and wages expense (sales)             (e)	$285,850
Sales commissions                                       (f)	$84,850
Telephone and Internet expense (sales)       (g)	$18,850
Selling expenses           [a + b + c + d + e + f + g]	$648,950

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Working note 4 - Calculation of administrative expenses
Accounting and legal services                          (a)	$34,850
Insurance expense (office)                                (b)	$25,850
Depreciation expense (office equipment)          (c)	$49,850
Salaries and wages expense (office)              (d)	$347,850
Utilities expense (office)                                   (e)	$33,850
Miscellaneous office expenses                          (f)	$9,850
Selling expenses           [a + b + c + d + e + f ]	$502,100