38,880 Accounting for Merchandising Businesses

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Chapter 5 Accounting for Merchandising Businesses

EX 5-23 Multiple-step income statement OBJ. 3 On February 28, 2014, the balances of the accounts appearing in the ledger of Foldaway Furnishings Company, a furniture wholesaler, are as follows: Accumulated Depreciation—Building 150,000 Notes Payable 400,000 Administrative Expenses 290,000 Oice Supplies 20,000 Building 1,130,000 Retained Earnings 416,000 Capital Stock 175,000 Salaries Payable 6,000 Cash 97,000 Sales 2,850,000 Cost of Merchandise Sold 1,641,000 Sales Discounts 25,000 Dividends 50,000 Sales Returns and Allowances 90,000 Interest Expense 29,000 Selling Expenses 300,000 Merchandise Inventory 260,000 Store Supplies 65,000 a. Prepare a multiple-step income statement for the year ended February 28, 2014. b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements. EX 5-24 Multiple-step income statement OBJ. 3 Identify the errors in the following income statement: Curbstone Company Income Statement For the Year Ended August 31, 2014 Revenue from sales: Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,132,000 Add: Sales returns and allowances . . . . . . . . . . . . . . . . . . . . . . 422,000 Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,000 537,000 Gross sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,669,000 Cost of merchandise sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,110,000 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,559,000 Expenses: Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,000 Delivery expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425,000 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000 1,759,000 Other expense: Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,714,000 EX 5-25 Single-step income statement OBJ. 3 Summary operating data for Cummerbund Company during the current year ended June 30, 2014, are as follows: cost of merchandise sold, 2,400,000; administrative expenses, 420,000; interest expense, 30,000; rent revenue, 125,000; net sales, 3,750,000; and selling expenses, 550,000. Prepare a single-step income statement. EX 5-26 Adjusting entry for merchandise inventory shrinkage OBJ. 4 Road Runner Tire Co.’s perpetual inventory records indicate that 1,498,200 of mer- chandise should be on hand on December 31, 2014. The physical inventory indicates that 1,483,750 of merchandise is actually on hand. Journalize the adjusting entry

a. Net income: 475,000

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