Question

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:

Cash	$108,300		Retained Earnings	477,200
Accounts Receivable	293,800		Dividends	64,800
Inventory	329,100		Sales	$3,965,700
Estimated Returns Inventory	22,500		Cost of Goods Sold	2,293,800
Office Supplies	10,200		Sales Salaries Expense	645,000
Prepaid Insurance	7,900		Advertising Expense	177,400
Office Equipment	238,300		Depreciation Expense—    Store Equipment	34,600
Accumulated Depreciation—    Office Equipment	161,900		Miscellaneous Selling Expense	15,100
Store Equipment	743,800		Office Salaries Expense	352,100
Accumulated Depreciation—    Store Equipment	238,300		Rent Expense	52,000
Accounts Payable	164,900		Depreciation Expense—    Office Equipment	26,000
Customer Refunds Payable	40,000		Insurance Expense	16,100
Salaries Payable	10,500		Office Supplies Expense	9,500
Note Payable    (final payment due 2024)	345,000		Miscellaneous Administrative Exp.	6,900
Common Stock	54,200		Interest Expense	10,500

Required:

1. Prepare a multiple-step income statement.

Clairemont Co. Income Statement For the Year Ended May 31, 2018
Expenses:
Selling expenses:
Total selling expenses
Administrative expenses:
Total administrative expenses
Total operating expenses

2. Prepare a retained earnings statement.

Clairemont Co. Retained Earnings Statement For the Year Ended May 31, 2018

3. Prepare a balance sheet, assuming that the current portion of the note payable is $17,250.

Clairemont Co. Balance Sheet May 31, 2018
Assets
Current assets:
Total current assets
Property, plant and equipment:
Total property, plant and equipment
Total assets
Liabilities
Current liabilities:
Total current liabilities
Long-term liabilities:
Total liabilities
Stockholders' equity
Total stockholders' equity
Total liabilities and stockholders' equity

4. a. Which type of income statement shows intermediate balances?

Answer 1

• Requirement 1

Clairemont Co.
Income Statement
For the Year Ended May 31, 2018
Sales			$        3,965,700
Cost of Goods Sold			$        2,293,800 [deduct]
Gross Profits			$        1,671,900
Expenses:
Selling expenses:
Sales Salaries Expense	$        645,000
Advertising Expense	$        177,400
Depreciation Expense— Store	$          34,600
Miscellaneous Selling Expense	$          15,100
Total selling expenses		$        872,100
Administrative expenses:
Office Salaries Expense	$        352,100
Rent Expense	$          52,000
Insurance Expense	$          16,100
Office Supplies Expense	$            9,500
Miscellaneous Administrative Exp.	$            6,900
Depreciation Expense— Office	$          26,000
Total administrative expenses		$       462,600
Total operating expenses			$        1,334,700
Operating Income			$            337,200
Other revenue and expense
Interest Expense			$              10,500 [this amount will be deducted]
Net Income			$            326,700

• Requirement 2

Clairemont Co.
Retained Earnings Statement
For the Year Ended May 31, 2018
Beginning balance		$        477,200
Add: Net Income	$        326,700
Less: Dividends	$          64,800
Net Increase (Decrease)		$        261,900
Ending Balance		$        739,100

• Requirement 3

Clairemont Co.
Balance Sheet
May 31, 2018
Assets
Current assets:
Cash		$        108,300
Accounts Receivable		$        293,800
Inventory		$        329,100
Estimated Returns Inventory		$          22,500
Office Supplies		$          10,200
Prepaid Insurance		$            7,900
Total current assets			$            771,800
Property, plant and equipment:
Office Equipment	$          238,300
Accumulated Depreciation—	$       (161,900)	$          76,400
Store Equipment	$          743,800
Accumulated Depreciation—	$       (238,300)	$        505,500
Total property, plant and equipment			$            581,900
Total assets			$        1,353,700
Liabilities
Current liabilities:
Accounts Payable		$        164,900
Customer Refunds Payable		$          40,000
Salaries Payable		$          10,500
Note Payable (Short term)		$          17,250
Total current liabilities			$            232,650
Long-term liabilities:
Note Payable (Long Term)			$            327,750
Total liabilities			$            560,400
Stockholders' equity
Common Stock		$          54,200
Retained Earnings		$        739,100
Total stockholders' equity			$            793,300
Total liabilities and stockholders' equity			$        1,353,700

• Requirement 4

Multi Step Income Statement shows intermediate balances.