Question

On January 1, Year 1, the general ledger of a company includes the following account balances:

Accounts	Debit	Credit
cash	$59,000
accounts receivable	$25,600
allowance for uncollectible accounts		2,500
inventory	36,600
notes receivable (5%, due in 2 years)	15,600
land	158,000
Accounts payable		15,100
common stock		223,000
retained earnings		54,200
Totals	294,800	294,800

During January 1 Year 1, the following transactions occur:

January 1	Purchase equipment for $19,800. The company estimates a residual value of $1,800 and a six-year service life.
January 4	Pay cash on account payable, $9,800
January 8	Purchase additional inventory on account, $85,900.
January 15	Receive cash on accounts receivable, $22,300.
January 19	Pay cash for salaries, $30,100
January 28	Pay cash for January utilities, $16,800
January 30	Sales for January total $223,00. All of these sales are on account. The cost of the units sold is $116,500.

Information for adjusting entries:

a. Depreciation on the equipment for the month of January is calculated using the straight-line method.

b. The company estimates future uncollectible accounts. The company determines $3,300 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 2% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

c. Accrued interest revenue on notes receivable for January

d. Unpaid salaries at the end of January are $32,900.

e. Accrued income taxes at the end of January are $9,300.

Prepare a multi-step income statement for the period ended January 31, Year 1.

MULTIPLE-STEP	INCOME	STATEMENT
FOR THE MONTH	ENDED	JANUARY 31, YEAR 1
		$
Expenses
Total operating expenses
		$

Answer 1

Answer: Multi-step income statement for the period ended January 31m Year1:

	Income statement for the period ended January 31, Year 1.	Amount
A	Sales	$       2,23,000
B	Cost of unit sold	$       1,16,500
C	Gross margin (A-B)	$       1,06,500
	Operating expenses
	Salaries (Including unpaid salaries)	$           63,000
	Utilities	$           16,800
	Depreciation (Note 1)	$                 250
	Allowance for uncollectible account (Note 3)	$             3,560
D	Total operating expenses	$           83,610
E	Operating profit (C-D)	$           22,890
F	Interest on notes receivable (Note 2)	$                   65
G	Income before tax (E+F)	$           22,955
H	Income tax	$             9,300
	Income after tax (G-I)	$           13,655

Notes:

1. Depreciaiton amount

Caculation of Depreciation	Amount
Purchase cost	$           19,800
Residual Value	$             1,800
Depreciable value	$           18,000
Estimated usefuld life	6 yrs
Depreciation per year	$             3,000
Depreciation per month	$                 250

2 Calculation of accrued interest on notes receivable:

Notes receivable	$           15,600
Rate of interest	$                     0
Per year interest	$                 780
Per month interest	$                   65

3. Calculation of allowance for uncollectible amount charge in income statement:

Particular	Amount
Account recevable less account receivable	$     25,600
Sale during the month	$ 2,23,000
Received Cash	$    -22,300
Closing balance	$ 2,26,300
Past due amount	$      -3,300
	$ 2,23,000
	$        4,460
Less balance remain in Allowance for uncollectible account (2500-1600)	$          -900
Allowance for uncollectibel account	$        3,560