BRIEF EXERCISE 5-7
ARNDT COMPANY
Income Statement (Partial)
For the Month Ended October 31, 2015
Sales
Sales revenue ($280,000 + $100,000) …………….. $380,000
BRIEF EXERCISE 5-8
As the name suggests, numerous steps are required in determining net
income in a multiple-step income statement. In contrast, only one step is
(1) Multiple-Step Income Statement
Item
Section
a.
b.
c.
d.
Gain on sale of equipment
Interest expense
Casualty loss from vandalism
Cost of goods sold
Other revenues and gains
Other expenses and losses
Other expenses and losses
Cost of goods sold
(2) Single-Step Income Statement
Item
Section
a.
b.
c.
d.
Gain on sale of equipment
Interest expense
Casualty loss from vandalism
Cost of goods sold
Revenues
Expenses
Expenses
Expenses
BRIEF EXERCISE 5-9
*BRIEF EXERCISE 5-10
(b) Inventory: Trial balance debit column; Adjusted trial balance debit
column; Balance sheet debit column.
credit column, Income statement credit column.
*BRIEF EXERCISE 5-11
Purchases ……………………………………………………………. $450,000
Net purchases ………………………………………………………. $429,000
*BRIEF EXERCISE 5-12
Net sales ……………………………………………………………… $730,000
Beginning inventory ……………………………………………… $ 60,000
Add: Cost of goods purchased*……………………………. 445,000
*Information taken from Brief Exercise 5-11.
*BRIEF EXERCISE 5-13
(a) Purchases …………………………..……………………….. 900,000
(b) Accounts Payable ………………………………………… 130,000
(c) Accounts Payable ($900,000 – $130,000) ……….. 770,000
*BRIEF EXERCISE 5-14
Inventory (ending) …………………………..……………………. 30,000
Income Summary …………………………………………………. 162,000
Purchases ……………………………………………………. 120,000
*BRIEF EXERCISE 5-15
debit column.
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 5-1
Oct. 5 Inventory ………………………………………………………. 5,000
(To record goods purchased on account)
Oct. 8 Accounts Payable ………………………………………….. 650
(To record return of defective goods)
DO IT! 5-2
Oct. 5 Accounts Receivable …………………………..………… 5,000
(To record credit sales)
Cost of Goods Sold ……………………………………….. 3,100
(To record cost of goods sold on account)
Oct. 8 Sales Returns and Allowances ………………………. 650
(To record credit granted for receipt
of returned goods)
Inventory ………………………………………………………. 100
(To record fair value of goods returned)
DO IT! 5-3
Dec. 31 Sales Revenue ………………………………………………. 156,000
Income Summary …………………………………………… 127,800
Cost of Goods Sold ………………………………….. 92,400
Sales Returns and Allowances ………………….. 4,000
(To close accounts with debit balances)
DO IT! 5-4
Account
Financial Statement
Classification
Accounts Payable
Balance sheet
Current liabilities
Accounts Receivable
Balance sheet
Current assets
Accumulated Depreciation—
Buildings
Balance sheet
Property, plant, and
equipment
Cash
Balance sheet
Current assets
Casualty Loss from
Vandalism
Income statement
Other expenses and
losses
Common Stock
Balance sheet
Stockholders’ equity
Cost of Goods Sold
Income statement
Cost of goods sold
Depreciation Expense
Income statement
Operating expenses
Dividends
Retained earnings
statement
Deduction section
Equipment
Balance sheet
Property, plant, and
equipment
Freight-Out
Income statement
Operating expenses
Insurance Expense
Income statement
Operating expenses
Interest Payable
Balance sheet
Current liabilities
Inventory
Balance sheet
Current assets
Land
Balance sheet
Property, plant, and
equipment
Notes Payable
(due in 5 years)
Balance sheet
Long-term liabilities
Property Taxes Payable
Balance sheet
Current liabilities
Salaries and Wages
Expense
Income statement
Operating expenses
Salaries and Wages Payable
Balance sheet
Current liabilities
Sales Returns and
Allowances
Income statement
Sales
Sales Revenue
Income statement
Sales
Unearned Rent Revenue
Balance sheet
Current liability
Utilities Expense
Income statement
Operating expenses
SOLUTIONS TO EXERCISES
EXERCISE 5-1
EXERCISE 5-2
(a) (1) April 5 Inventory …………………………………… 23,000
(2) April 6 Inventory …………………………………… 900
(3) April 7 Equipment …………………………………. 26,000
(4) April 8 Accounts Payable ……………………… 3,000
(5) April 15 Accounts Payable ……………………… 20,000
($23,000 – $3,000)
Inventory
[($23,000 – $3,000) X 2%] ….. 400
(b) May 4 Accounts Payable ……………………………… 20,000
EXERCISE 5-3
Sept. 6 Inventory (80 X $20) …………………………………. 1,600
9 Inventory ………………………………………………… 80
10 Accounts Payable ……………………………………. 63
12 Accounts Receivable (26 X $31) ……………….. 806
14 Sales Returns and Allowances ………………… 31
Inventory ……………………………………………….. 21
20 Accounts Receivable (30 X $32) ………………. 960
EXERCISE 5-4
(a) June 10 Inventory …………………………………………. 8,000
11 Inventory …………………………………………. 400
12 Accounts Payable …………………………….. 300
19 Accounts Payable ($8,000 – $300) ……… 7,700
Inventory
EXERCISE 5-4 (Continued)
(b) June 10 Accounts Receivable ……………………….. 8,000
Sales Revenue ………………………….. 8,000
12 Sales Returns and Allowances …………. 300
Accounts Receivable ………………… 300
19 Cash ($7,700 – $154) ………………………… 7,546
EXERCISE 5-5
(a) 1. Dec. 3 Accounts Receivable …………………. 570,000
Sales Revenue ……………………. 570,000
2. Dec. 8 Sales Returns and Allowances …… 20,000
3. Dec. 13 Cash ($550,000 – $11,000) ………….. 539,000
Sales Discounts
(b) Cash ……………………………………………………………….. 550,000
Accounts Receivable