Reference no: EM131848653

Question: Purpose of Assignment: The purpose of this assignment is to help you become familiar with the parts of the multiple-stepincome statement.

Assignment Steps: Resources:Financial Accounting: Tools for Business Decision Making

Scenario: An inexperienced accountant prepared this condensed income statement for SimonCompany, a retail firm that has been in business for a number of years.

SIMON COMPANY

Income Statement

For the Year Ended December 31, 2017

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 21, $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 2018.

Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate.

Show your work on the Excel® spreadsheet and submit with your explanation.