Question

Exercise 2-1

For this exercise, use the following fiscal year-end unadjusted trial balance for the Bigelow Company.

Note:   Rent and salary expenses are divided equally between general/administrative and selling activities. Bigelow uses a perpetual inventory system

1.   Prepare a fiscal year 2012 multiple-step income statement. For distinguished performance, prepare both multiple- and single-step income statements.

BIGELOW COMPANY Unadjusted Trial Balance April 30, 2012 (Fiscal year-end)
	Debit	Credit
Cash........................................................................	$2,150
Merchandise inventory..............................................	12,100
Store supplies..........................................................	4,600
Prepaid insurance.....................................................	2,100
Store equipment.......................................................	42,350
Accumulated depreciation—Store equipment.............		$12,000
Accounts payable.....................................................		8,700
Common stock.........................................................		4,500
Retained earnings.....................................................		25,400
Dividends................................................................	1,800
Sales.......................................................................		108,500
Sales discounts........................................................	950
Sales returns and allowances....................................	1,750
Cost of goods sold..................................................	36,300
Depreciation expense—Store equipment...................	0
Salaries expense......................................................	32,500
Insurance expense....................................................	0
Rent expense...........................................................	13,800
Store supplies expense............................................	0
Advertising expense.................................................	8,700	_______
Totals......................................................................	$159,100	$159,100

Adjusted Journal Entries

Adjustment Account Name   Debit   Credit

Adjustment A Supplies Expense   $2,900   
Supplies $2,900
Adjustment B Insurance Expense   $1,800   
Prepaid Insurance       $1,800
Adjustment C   Depreciation Expense (Store Equipment)   $1,250   
Accumulated Depreciation (Store Equipment)       $1,250
Adjustment D Cost of Goods Sold    $900   
Inventory       $900

Answer 1

BEGELOW COMPANY
Income Statement (Multi-Step)
For the year ended April 30,2012
Sales		$108,500
Less: Sales discounts		$950
Less: Sales returns and allowances		$1,750
Net sales		$105,800
Cost of goods sold		$37,200
Gross profit		$68,600
Operating expenses:
Depreciation expense—Store equipment	$1,250
Salaries expense	$32,500
Insurance expense	$1,800
Rent expense	$13,800
Store supplies expense	$2,900
Advertising expense	$8,700
Total Operating expenses		$60,950
Operating income		$7,650

.

BEGELOW COMPANY
Income Statement (Single-step)
For the year ended April 30,2012
Sales		$108,500
Expenses:
Sales discounts	$950
Sales returns and allowances	$1,750
Cost of goods sold	$37,200
Depreciation expense—Store equipment	$1,250
Salaries expense	$32,500
Insurance expense	$1,800
Rent expense	$13,800
Store supplies expense	$2,900
Advertising expense	$8,700
Total Expenses		$100,850
Net income		$7,650