Question

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

CULLUMBER COMPANY Income Statement For the Year Ended December 31, 2017
Revenues
Net sales		$901,000
Other revenues		23,320
		924,320
Cost of goods sold		588,300
Gross profit		336,020
Operating expenses
Selling expenses		115,540
Administrative expenses		109,180
		224,720
Net earnings		$111,300

As an experienced, knowledgeable accountant, you review the statement and determine the following facts.

1.		Net sales consist of sales $965,660, less freight-out on merchandise sold $34,980, and sales returns and allowances $29,680.
2.		Other revenues consist of sales discounts $19,080 and rent revenue $4,240.
3.		Selling expenses consist of salespersons’ salaries $84,800; depreciation on equipment $10,600; advertising $13,780; and sales commissions $6,360. The commissions represent commissions paid. At December 31, $3,180 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 $49,820; dividends $19,080; utilities $12,720; interest expense $2,120; and rent expense $25,440, which includes prepayments totaling $6,360 for the first quarter of 2018.

Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate. (List other revenues before other expenses. Round answers to 0 decimal places, e.g. 5,125.)

Answer 1

Detailed Multi-step Income statement for the year ended December 31, 2017:-
CULLUMBER COMPANY
Income Statement
For the Year Ended December 31, 2017
Operating Revenue
	Sales				965,660
Less:	Sales returns				29,680
Less:	Sales Discounts				19,080
	Net Sales				916,900
Cost of Goods Sold
	Cost of Goods sold				588,300
	Gross Profit (Loss)				328,600
Operating Expenses
	Selling Expenses
	Freight-out		34,980
	Salaries Expense—Sales		84,800
	Depreciation Expense— Equipment		10,600
	Advertising		13,780
	Sales commissions (6360+3180)		9,540
	Total Selling Expenses			153,700
	General and Administrative expenses
	Salaries Expense—Office		49,820
	Utilities Expense		12,720
	Rent Expense (25440-6360)		19,080
	Total General and Administrative expenses			81,620
Less:	Total Operating Expenses				235,320
Operating Income (Loss)					93,280
Other Income and Expenses
	Other Revenue
	Rent Revenue			4,240
	Other expense				-
Less	Interest Expense			2,120
Net Other Incomes and Expenses				-	2,120
Income before taxes					95,400
Less:	Tax Expense (95400*25%)				23,850
Net Income					71,550

Feel free to ask any clarification, if required. Please provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you.