Question

Required
Use the following information to prepare a multistep income statement and a classified balance sheet for Eller Equipment Co. for Year 1. (Hint: Some of the items will not appear on either statement, and ending retained earnings must be calculated.)

Salaries expense	$	103,000		Beginning retained earnings	$	42,100
Common stock		91,000		Warranties payable (short term)		4,600
Notes receivable (short term)		13,500		Gain on sale of equipment		8,000
Allowance for doubtful accounts		15,000		Operating expenses		46,000
Accumulated depreciation		47,000		Cash flow from investing activities		97,000
Notes payable (long term)		141,000		Prepaid rent		19,000
Salvage value of building		11,000		Land		76,000
Interest payable (short term)		7,000		Cash		44,900
Uncollectible accounts expense		26,000		Inventory		127,000
Supplies		4,600		Accounts payable		36,000
Equipment		206,900		Interest expense		17,000
Interest revenue		4,300		Salaries payable		49,000
Sales revenue		902,000		Unearned revenue		28,000
Dividends		16,000		Cost of goods sold		576,000
Warranty expense		7,300		Accounts receivable		89,000
Interest receivable (short term)		1,700		Depreciation expense		1,100

Prepare a multistep income statement for Eller Equipment Co. for Year 1. (Amounts to be deducted should be indicated with a minus sign.)

Prepare a multistep Balance sheet for Eller Equipment Co. for Year 1. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

SOLUTION

1. Multistep Income statement

Particulars	Amount ($)	Amount ($)
Sales revenue		902,000
Less: Cost of goods sold		(576,000)
Gross margin		326,000
Less: Operating expenses
Salaries expense	103,000
Operating expenses	46,000
Warranty expenses	7,300
Uncollectible accounts expense	26,000
Depreciation expense	1,100
Total operating expenses		(183,400)
Operating income		142,600
Non operating items-
Interest revenue	4,300
Interest expense	(17,000)
Gain on sale of Equipment	8,000
Total non-operating items		(4,700)
Net income		137,900

2. Balance sheet

	Amount ($)	Amount ($)	Amount ($)
ASSETS
Current assets:
Cash		44,900
Accounts receivable	89,000
Less: Allowance for doubtful accounts	(15,000)	74,000
Merchandise inventory		127,000
Interest receivable		1,700
Prepaid rent		19,000
Supplies		4,600
Notes receivable		13,500
Total current assets			284,700
Property Plant and Equipment:
Equipment	206,900
Less: Accumulated depreciation	(47,000)	159,900
Land		76,000
Total Property Plant and Equipment:			235,900
Total Assets			520,600
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accoounts payable		36,000
Unearned revenue		28,000
Warranties payable		4,600
Interest payable		7,000
Salaries payable		49,000
Total current liabilities			124,600
Long term liabilities:
Notes payable		141,000
Total Long term liabilities			141,000
Stockholder's Equity:
Common stock		91,000
Retained Earnings		164,000
Total Stockholder's Equity			255,000
Total liabilities and Stockholder's Equity			520,600

Retained Earnings = Beginning retained earnings + Net income - Dividends

= 42,100 + 137,900 - 16,000

= 164,000