Question

The following balances were included in the Adjusting Trial Balance of Q-Mart, Inc. at September 31, 2018

Note: not all balances from the adjusting trial balance were given:

Sales	$5,375,000
Depreciation Expense (admin)	91,300
Sales Discounts	15,000
Cost of Goods Sold	3,589,000
Property Tax Expense (admin)	17,000
Sales Salaries Expense	57,000
Bad Debt Expense (selling)	18,500
Sales Bonus Expense	17,500
Building expense (admin)	225,000
Travel expense	28,500
Freight-out (shipping)	37,000
Miscellaneous Expenses (admin)	15,000
Entertainment expense (customers)	6,000
Sales Returns	55,000
Telephone and Internet expense (selling)	15,000
Dividend Revenue	29,000
Depreciation Expense (selling)	6,000
Bond Interest expense	39,000
Building expense (selling)	16,000
Income taxes Expense	350,000
Miscellaneous expense (selling)	4,700
Depreciation understated due to error in 2015 (net of tax)	73,000
Office Supplies Expense - admin	5,100
telephone and internet expense	3,500
rent expense (admin)	75,000
rent expense (admin)	35,000
dividends declared on preferred stock	275,000
dividends declared on common stock	158,000

The retained earnings account had a balance of $229,000 at October 1, 2017 (at the start of the fiscal year)

There were 50,000 shares of common stock outstanding for the entire year.

Instructions

Create:
1. a multiple-step income statement for the year ending September 31, 2018
2. A retained earning statement for the year ending September 31, 2018

Answer 1

1. Multistep Income Statement is as below:

Particulars	Amount ($)	Amount ($)
Sales	5375000
Less: Sales discounts	15000
: Freight out	37000
: Sales returns	55000
Net Revenue		5268000
Cost of goods sold		3589000
Gross Profit		1679000
Less: Selling & Administrative Expenses:
Administrative Expenses
Depreciation	91300
Property tax	17000
Building expenses	225000
Miscellaneous expenses	15000
Office supplies	5100
Telephone & internet expense	3500
Rent	110000
Total Administrative expenses		466900
Selling Expenses:
Sales salaries expense	57000
Bad debt expense	18500
Sales bonus expenses	17500
Travel expense	28500
Entertainment expense	6000
Telephone & internet expense	15000
Depreciation	6000
Building expenses	16000
Miscellaneous expenses	4700
Total Selling Expenses		169200
Less: Income tax expense		350000
Operating Income		692900
Non operating items:
Dividend revenue	29000
Less: Bond interest expense	39000
Net non operating expense		10000
Net Income before extraordinary item		682900
Less: depreciation due to error in 2015		75000
Net Income		607900
Number of common shares		50000
Earnings per share		$12.16

2. Retained Earnings Statement is as below:

Particulars	Amount ($)
Beginning retained earnings	229000
Add: Net Income	692900
Less: Preferred dividend	275000
Less: Common stock dividend	158000
Ending Retained Earnings	488900