Question

Question 3: (CLO 4 and 5)   

The adjusted trial balance of Miracle Company contained the following information:

                                                                                               Debit                       Credit   

Sales                                                                                                                $1,420,000

Interest Revenue                                                                                                    100,000

Sales Returns and Allowances                                                 $40,000                             

Sales Discounts                                                                         14,000                              

Cost of Goods Sold                                                                 872,000                              

Freight-out                                                                                  4,000                              

Advertising Expense                                                                 30,000                              

Interest Expense                                                                        36,000                              

Store Salaries Expense                                                             110,000                              

Utilities Expense                                                                       56,000                              

Depreciation Expense                                                                14,000                              

Dividends                                                                                 50,000

Instructions:

1. Use the above information to prepare an income statement for the year ended December 31, 2019.
2. Prepare the closing entries for Miracle Company at December 31, 2019.

Answer 1

Multi step income statement

Net sales:
Sales	1,420,000
Sales returns	- 40,000
Sales discounts	- 14,000
Net sales revenue		1,366,000
Cost of goods sold		- 872,000
Gross profit		494,000
Operating expenses:
Freight-out	- 4,000
Advertising Expense	- 30,000
Store Salaries Expense	- 110,000
Utilities Expense	- 56,000
Depreciation Expense	- 14,000
Total Operating expenses		- 214,000
Operating profit		280,000
Other revenues:
Interest income		100,000
Other expenses:
Interest expense		- 36,000
Net income		$344,000

Journal

December 31, 2019.	Sales revenue	1,420,000
	Interest revenue	100,000
	Income summary		1,520,000
December 31, 2019.	Income summary	1,176,000
	Sales Returns and Allowances		40,000
	Sales Discounts		14,000
	Cost of Goods Sold		872,000
	Freight-out		4,000
	Advertising Expense		30,000
	Interest Expense		36,000
	Store Salaries Expense		110,000
	Utilities Expense		56,000
	Depreciation Expense		14,000
December 31, 2019.	Income summary	344,000
	Retained earnings		344,000
December 31, 2019.	Retained earnings	50,000
	Dividends		50,000