Question

The following income statement was prepared by an office clerk hired for July. As the accounting supervisor, you recognize that it is incorrect and prepare a corrected multi-step income statement.

Demo Sales
Income Statement
For Month Ended July 31, 2017
Sales			$	563,240
Accounts receivable				37,550
Unearned sales				18,220
Net sales			$	619,010
Operating expenses:
Accumulated depreciation, equipment	$	30,550
Advertising expense		14,220
Cost of goods sold		396,200
Depreciation expense, equipment		3,220
Insurance expense		2,610
Interest expense		1,920
Interest payable		305
Jen Conway, withdrawals		14,110
Office supplies		10,100
Prepaid insurance		16,200
Prepaid rent		25,550
Rent expense		5,660
Salaries payable		175,200
Sales discounts		3,020		698,865
Loss			$	79,855

My Answer

	DEMO SALES Income Statement For Month Ended July 31, 2017 Net sales $619,010 Cost of goods sold 396,200 Gross profit $222,810 Operating expenses: Advertising expense $14,220 Insurance expense 2,610 Rent expense 5,660 Depreciation expense, equipment 3,220 Total operating expenses 25,710 Profit from operations 197,100 Other revenues and expenses: Interest expense 1,920 Profit 199,020

was this done correctly ?

Answer 1

All figures are correct except Sales and Sales discount figures as highlighted below:

Net sales of $619,010 as reported by them is wrong as it includes accounts receivable and Unearned Sales which are both Balance Sheet items and not Income Statement items.

And please consider Sales Discount while calculating Net Sales.