Question

	Windsor Corporation
	Trial Balance
	June 30, 2017
Accounts	Balance
Sales revenue	1,583,270
Sales discounts	31,410
Cost of goods sold	898,200
Salaries and wages expense (sales)	56,480
Sales commissions	98,010
Travel expense (salespersons)	34,800
Delivery expense	22,840
Entertainment expense	15,090
Telephone and Internet expense (sales)	9,070
Depreciation expense (sales equipment)	4,902
Maintenance and repairs expense (sales)	6,085
Miscellaneous selling expenses	4,920
Office supplies used	3,325
Telephone and Internet expense (administration)	2,748
Depreciation expense (office furniture and equipment)	6,832
Property tax expense	7,602
Bad debt expense (selling)	4,608
Maintenance and repairs expense (administration)	9,270
Office expense	6,040
Sales returns and allowances	58,411
Dividends received	41,560
Interest expense	17,500
Income tax expense	109,130
Depreciation understatement due to error—2014 (net of tax)	18,308
Dividends declared on preferred stock	9,790
Dividends declared on common stock	34,320
The Retained Earnings account had a balance of $339,770 at July 1, 2016.
There are 80,550 shares of common stock outstanding.
In the space below, prepare the following statements for the year ended June 30, 2017:
multiple-step income statement, single-step income statement, and statement of retained earnings

Answer 1

MULTI-STEP INCOME STATEMENT

A Multi-step income statement reveals the Company's various sources of revenue and expense as different line items.It offers detailed information about the Gross profit-which is the difference between the Sales Revenue and the Cost of goods sold-and also,the Operating Profit-the difference between the Gross profit and the company's operating expenses

Windsor Corporation Multi-Step Income Statement for the year ending 30 June 2017
Net Sales(WN-1)			1,493.449
Cost of Goods sold			(898,200)
Gross Profit			595,249
Operating Expenses:
Selling expense:
Salaries and Wages Expense	56,480
Sales Commission	98010
Travel expense(sales)	34,800
Delivery expense	22,840
Entertainment expense	15,090
Telephone and Internet Expense(sales)	9070
Depreciation expense(sales equipment)	4902
Maintenance and repair expense(sales)	6085
Miscellaneous selling expense	4920
Total selling expense		(256,805)
Administrative Expenses:
Office supplies used	3325
Telephone and Internet expense	2748
Depreciation expense(Office furniture and equipment)	6832
Property tax	7602
Maintenance and Repair expense	9270
Office expense	6040
Total Administrative expense		(35,817)
Total operating expenses			(292,622)
Operating profit:			302,627
Other Income:
Dividend received			41,560
Other expense:
Interest expense	(17,500)
Depreciation understatement due to error-2014 (WN-2)	(18,308)
Total other expense			(35,808)
Profit before Tax			308,379
Income Tax			(109.130)
Net Income			199,249

WN-1:-T he value of Revenue to be included in the income statement is the net figure, not the gross amount                  

Net Sales=Gross sales-Sales Discounts-Sales refunds-sales allowance

In this case,the net sales revenue=1,583,270(Gross sales)-31,410(Sales discounts)-58,411(Sales refund and allowance)

                                                  =$1,493,449

WN-2:- Depreciation being understated in an previous period due to an error has to be corrected in the current period.Since the value was understated by $18308,this amount will be treated as an expense and added to Other expenses to correct the error.

SINGLE-STEP INCOME STATEMENT:

A Single-step income statement is a very straight-forward and simplified presentation of the accounts of a business.The revenues and gains are totaled and from this value, the added figure of expenses and losses are subtracted.Basically,

Net Income=(Revenue+Gains)-(Expenses+Losses)

Windsor Corporation Single-Step Income Statement for the year ending 30 June 2017
Revenues:
Net Sales Revenue	1,493,449
Dividend Received	41,560
Total Income		1,535,009
Expenses:
Cost of goods sold	898,200
Selling expenses	256,805
Administrative expense	35,817
Interest expense	17,500
Depreciation undervalued due to error-2014	18,308
Total expenses		(1,226,630)
Income before tax		308,379
Income tax for the year		109,130
Net Income		199,249

STATEMENT OF RETAINED EARNINGS:

Windsor Corporation Statement of Retained Earnings for the year ending 30 June 2017
Retained Earnings at 1 July 2016	339,770
Prior Period Adjustment:
Correction to Depreciation expense:(WN-1)	(18,308)
Adjusted Retained Earnings at 1 July 2016	321,462
PLUS Net income	199,249
LESS Dividends declared and paid:
Dividends declared on preferred stock	(9790)
Dividend declared on common stock	(34,320)
Retained earnings as at 30 June 2017	277,352

WN-1:- If depreciation,which is an expense,was undervalued by $18,308 in a previous period,then the retained earnings of that period would correspondingly have been overstated by the same amount.In order to correct this error,the Opening balance of the current year Retained earnings would have to be reduced by that amount to give the Adjusted Retained Earnings opening balance