Question

The following selected accounts and their current balances appear in the ledger of Cypress Co. for the fiscal year ended June 30, 2015:

Cash                                       $ 26,500           Sales                                        $ 1,500,000

Notes Receivable                         50,000           Sales Returns & Allowances            21,000

Accounts Receivable                    62,000           Sales Discounts                               11,000

Merchandise Inventory              100,000           Cost of Merchandise Sold            1,070,000

Office Supplies                            2,600           Sales Salaries Expense                  210,000

Prepaid Insurance                          6,800           Advertising Expense                         28,300

Office Equipment                        64,000           Depreciation Expense -

Accumulated Depreciation –                                   Store Equipment                           4,600

     Office Equipment                   10,800           Miscellaneous Selling Expense             1,100

Store Equipment                       117,500           Office Salaries Expense                      41,000

Accumulated Depreciation -                              Rent Expense                                   22,150

      Store Equipment                    48,600           Insurance Expense                            12,750

Accounts Payable                        27,000           Depreciation Expense -

Salaries Payable                            2,000                  Office Equipment                         9,000

Note Payable (10 years)            30,000           Office Supplies Expense                       900

Capital Stock                              60,000           Miscellaneous Admin Expense             1,200     

Retained Earnings                    208,000           Interest Revenue                                 5,000

Dividends                                   25,000           Interest Expense                                 4,000

1.         Prepare a multiple-step income statement

2.         Prepare a retained earnings statement

3.         Prepare a balance statement

Answer 1

• All working forms part of the answer
• Requirement 1: Multi Step Income Statement

Sales		$                         15,00,000.00
Less: Sales Return & Allowances	$                        21,000.00
Less: Sales discounts	$                        11,000.00	$                               32,000.00
Net Sales		$                         14,68,000.00
Cost of Goods Sold		$                         10,70,000.00
Gross Profit		$                           3,98,000.00
Operating Expenses:
Selling Expenses
Sales Salaries expense	$                    2,10,000.00
Advertising Expense	$                        28,300.00
Depreciation expense - Store Equipment	$                          4,600.00
Misc Selling Expense	$                          1,100.00
Administrative expenses
Office Salaries expense	$                        41,000.00
Rent Expense	$                        22,150.00
Insurance expense	$                        12,750.00
Depreciation expense - Office Equipment	$                          9,000.00
Office Supplies exp	$                              900.00
Misc Admin Expense	$                          1,200.00
Total Operating Expenses		$                           3,31,000.00
Operating Income		$                               67,000.00
Non Operating or Other:
Interest Revenue	$                          5,000.00
Interest Expense	$                        (4,000.00)
Total Non operating		$                                 1,000.00
Net Income		$                               68,000.00

• Requirement 2: Statement of Retained earnings

Beginning Balance		$                    2,08,000.00
Add: Net Income	$                          68,000.00
Less: Dividends	$                          25,000.00	$                        43,000.00
Ending Balance		$                    2,51,000.00

• Requirement 3: balance Sheet

Assets
Current Assets:
Cash	$                          26,500.00
Notes receivables	$                          50,000.00
Accounts receivables	$                          62,000.00
Merchandise Inventory	$                      1,00,000.00
Office Supplies	$                            2,600.00
Prepaid Insurance	$                            6,800.00	$                    2,47,900.00
Long Term Assets:
Office Equipment	$                          64,000.00
Accumulated Depreciation - Office Equipment	$                       (10,800.00)	$                        53,200.00
Store Equipment	$                      1,17,500.00
Accumulated Depreciation - Store Equipment	$                       (48,600.00)	$                        68,900.00
Total Assets		$                    3,70,000.00
Liabilities & Equity
Liabilities:
Accounts payable	$                          27,000.00
Salaries payable	$                            2,000.00
Notes payable	$                          30,000.00
Total Liabilities		$                        59,000.00
Stockholders' Equity
Capital Stock	$                          60,000.00
Retained Earnings (Ending balance)	$                      2,51,000.00	$                    3,11,000.00
Total Liabilities & Equity		$                    3,70,000.00