Question

The adjusted trial balance data given below is from the Morgan Company’s worksheet for the year ended December 31, 2019. The expense accounts numbered 611-615 represent selling expenses, and those numbered 621-631 represent general and administrative expenses.

ACCT.		ADJUSTED TRIAL BALANCE
NO.	ACCOUNT NAME		DEBIT		CREDIT
399	Income Summary		73,000		64,000
401	Sales				390,000
451	Sales Returns and Allowances		5,300
491	Interest Income				890
501	Purchases		195,000
502	Freight In		4,400
503	Purchases Returns and Allowances				3,000
504	Purchases Discounts				3,300
611	Sales Salaries Expense		68,000
613	Advertising Expense		3,500
615	Travel Expense		12,900
621	Office Salaries Expense		19,700
623	Office Supplies Expense		890
625	Utilities Expense		5,900
627	Payroll Taxes Expense		2,900
629	Uncollectible Accounts Expense		1,490
631	Depreciation Expense - Office Equipment		690
691	Interest Expense		3,000

Prepare a classified income statement for the year ended December 31, 2019.

Answer 1

Classified income statement for the year ended December 31, 2019, is as prepared below:

Morgan Company
Classified Income Statement
For the Year Ending December 31, 2019
Operating Income
Sales	390,000
Less sales return and allowances	-5,300
Net Sales		384,700
Cost of goods sold
Merchandise Inventory Jan 1, 2019		73,000
Purchases	195,000
Freight In	4,400
Delivered Cost of Purchases	199,400
Less: purchase return and allowances	-3,000
Purchase discounts	-3,300
Net delivered Cost of purchases		193,100
Total merchandise available for sale		266,100
Less: Merchandise inventory December 31, 2019		-64,000
Cost of goods sold		202,100
Gross Profit on sales		182,600
Operating Expenses
Selling Expenses
Salaries expense-sales	68,000
Advertising expense	3,500
Travel Expense	12,900
Total selling expenses		84,400
General and administrative expenses
Salaries exp-office	19,700
Office supplies expense	890
Utilities exp	5,900
Payroll tax expense	2,900
Uncollectible account expense	1,490
Dep exp-office equipment	690
Total general and administrative exp		31,570
Total operating exp		115,970
Income from operations		66,630
Other Income
Interest income	890
Other Expenses
Interest expense	3,000
Net Non operating income		-2,110
Net income of the year		64,520