Question

Income statement information for Blue Spruce Tire Repair Corporation for the year 2017 follows: General and administrative expenses: Freight-in $14,000 Salaries and wages expense $37,500 Purchase discounts 11,000 Depreciation expense—building 29,600 Dividend revenue 22,000 Office supplies expense 9,600 Inventory (beginning) 114,000 Inventory (ending) 139,000 Sales returns and allowances 14,000 Loss—other (due to flood damage) 51,000 Service expenses: Gain on the sale of equipment 6,000 Salaries and wages 68,000 Purchases 570,000 Depreciation expense—garage equipment 16,400 Sales revenue 900,000 Garage supplies expense 8,200 Interest expense 8,200 The effective tax rate on all income is 32%, and Blue Spruce applies ASPE. (a) Prepare a multiple-step income statement for 2017, showing expenses by function.

Answer 1

Income Statement :-

Particulars	Amount($)	Amount($)
Sale Revenue	900000
Less : Sales Returns and Allowances	($14000)
Net Sale Revenue	886000
Dividend Revenue	$22000
Total Revenue	908000	908000
Less : Cost of Goods sold (see below)		(548000)
Gross Profit		360000
Less : Operating Expense :-
Service Expenses :-
Salaries and Wages Expenses	68000
Depreciation-garage Equipment	16400
Garage supplie Expenses	8200
Administrative Expenses :-
Salaries and Wages Expenses	37500
Depreciation- Building	29600
Office supplie Expenses	9600
Total Operating Expenses	169300	(169300)
Operating Income		190700
Other Incomes and Expenses :-
Add : Gains on Sale Equipment	6200
Less : Loss (due to flood damage)	(51000)
Less : Interest Expense	(8200)
Net othe Income and Expense	(53000)	(53000)
Net Income		137700
Less : Income Tax @32%		(44064)
Net Income after Tax		93636

Cost of Goods Sold :-

= beginning stock + Purchase + Freight in - Purchase Discount - Ending Stock

= $114000+$570000+$14000-$11000-$139000

= $548000