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E5-10 Prepare multiple-step and single-step income statement
In its income statement for the year ended December 31, 2017, Anhad Company reported the following
condensed data.
Operating Expenses $725,000 $28,000
Cost of goods sold 1,289,000 17,000
Interest expense 70,000 Net sales 2,200,000
Instructions:
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) Multiple-step income statement
Value
Value
?
Value
?
Interest revenue Value
Other expenses and losses Value
Loss on disposal of plant assets Value ? ?
Net income ?
(b) Single-step income statement
Revenues
Net Sales Value
Interest revenue Value
Total revenues ?
Expenses
Cost of goods sold Value
Operating expenses Value
Interest expense Value
Loss on disposal of plant assets Value
Total expenses ?
Net income ?
For the Year ended December 31, 2017
Interest revenue
Loss on disposal of plant assets
Income Statement
ANHAD COMPANY
Income from operations
Operating expenses
Gross profit
Cost of goods sold
Net sales
ANHAD COMPANY
Income Statement
For the Year ended December 31, 2017
Interest expense
Other revenues and gains
After you have completed the requirements of E5-10, consider the additional question.
Answers are on the other tab in this file.
1. Assume cost of goods sold changed to $1,320,000. What impact does this have on net income,
as determined using both the multiple-step and single-step income statements?
E5-10 Solution
(a) Multiple-step income statement
$2,200,000
1,289,000
(b) Single-step income statement
Revenues
Net Sales $2,200,000
Interest revenue 28,000
ANHAD COMPANY
Income Statement
For the Year ended December 31, 2017
Net sales
Cost of goods sold
For the Year ended December 31, 2017
ANHAD COMPANY
Income Statement
E5-10 Solution to addition question
1. Assume cost of goods sold changed to $1,320,000. What impact does this have on net income,
as determined using both the multiple-step and single-step income statements?
(a) Multiple- step income statement
$2,200,000
1,320,000
(b) Single-step income statement
Revenues
Net Sales $2,200,000
Interest revenue 28,000
Total revenues 2,228,000
ANHAD COMPANY
Income Statement
For the Year ended December 31, 2017
Net sales
Cost of goods sold
Income Statement
For the Year ended December 31, 2017
ANHAD COMPANY
P5-1A Journalize purchase and sales transactions under a perpetual inventory system
Kern's Book Warehouse distributes hardcover books to retail stores and extend credit terms of 2/10, n/30 to all of its customers.
At the end of May, Kern's inventory consisted of books purchased for $1,800. During June, the following merchandising transactions
occurred.
June 1
Purchased books on account for $1,600 from Binsfield Publishers, FOB destination, terms 2/10, n/30.
The appropriate party also made a cash payment of $50 for the freight on this date.
3 Sold books on account to Reading Rainbow for $2,500. The cost of the books sold was $1,440.
6 Received $100 credit for books returned to Binsfield Publishers.
9 Paid Binsfield Publishers in full, less discount.
15 Received payment in full from Reading Rainbow.
17 Sold books on account to Rapp Books for $1,800. The cost of the books sold was $1,080.
20 Purchased books on account for $1,800 from McGinn Publishers, FOB destination, terms 2/15,n/30.
The appropriate party also made a cash payment of $60 for the freight on this date.
24 Received payment in full from Rapp Books.
26 Paid McGinn Publishers in full, less discount.
28 Sold books on account to Baeton Bookstore for $1,600. The cost of the books sold was $970.
30 Granted Baeton Bookstore $120 credit for books returned costing $72.
Kern's Book Warehouse's chart of accounts includes the following: No.101 Cash, No.112, Accounts Receivable,
No.120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No.412 Sales Returns and Allowances, No. 414
Sales Discounts, and No. 505 Cost of Goods Sold.
Instructions
Journalize the transactions for the month of June for Kern's Book Warehouse using a perpetual inventory system.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
June 1 Value Value
3 Value Value
`
3 Value Value
6 Value Value
9 Value Value
Value
15 Value Value
17 Value Value
17 Value Value
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
20 Value Value
24 Value
Value Value
26 Value Value `
Value
28 Value Value
28 Value Value
30 Value Value
' 30 Value Value
After you have completed the requirements of P5-1A, consider these additional questions.
Answers are on the other tab in this file.
1. Assume that the June 1 purchase changed to $2,500. Redo the journal entries
affected by this change.
2. Assume that the sale on June 28 changed to $3,000 and the cost of sale changed to
$1,200. Redo the journal entries affected by these changes.
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
Account
P5-1A Solution
June 1 1,600 1,600
6 100 100
9 1,500 30
1,470
15 2,500 2,500
17 1,800 1,800
Cash
Inventory
Accounts Payable
Accounts Payable
Inventory
Accounts Payable
Inventory
Cash
Accounts Receivable
Accounts Receivable
Sales Revenue
26 1,800 36
1,764
Purchase Discount = $1,800 x 2% = $36
' 28 1,600 1,600
Inventory
Accounts Payable
Cash
Accounts Receivable
Sales Revenue
P5-1A Solution to additional questions
1. Assume that the June 1 purchase changed to $2,500. Redo the journal entries
affected by this change.
June 1 2,500 2,500
6 100 100
2. Assume that the sale on June 28 changed to $3,000 and the cost of sale changed to
$1,200. Redo the journal entries affected by these changes.
28 3,000 3,000
Inventory
Accounts Payable
Accounts Receivable
Sales Revenue
Accounts Payable
Inventory
P5-5A Complete accounting cycle beginning with a worksheet
The trial balance of Gaolee Fashion Center contained the following accounts at November 30, the end of the company's fiscal year.
Debit Credit
Cash 20,700$
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation - Equipment 28,000$
Accounts Payable
48,500
Notes Payable 60,000
Owner's Capital 93,000
Owner's Drawings 12,000
Sales Revenue 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400
Salaries and Wages Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals $984,700 $984,700
Adjustment Data:
1. Supplies on hand totaled $2,600.
2. Depreciation is $11,500 on the equipment.
3. Interest of $3,800 is accrued on notes payable at November 30.
4. Inventory actually on hand is $44,400.
Instructions
(a) Enter the trial balance on a worksheet, and complete the worksheet.
(b) Prepare a multiple-step income statement and an owner's equity statement for the year, and
a classified balance sheet as of November 30, 2017. Notes payable of $20,000 are due in January 2018.
(c ) Journalize the adjusting entries.
(d) Journalize the closing entries.
(e ) Prepare a post-closing trial balance.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) Enter the trial balance on a worksheet, and complete the worksheet.
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 20,700 Value Value
Accounts Receivable 30,700 Value Value
Inventory 44,700 (d) ? ? Value
Supplies 6,200 (a) ? ? Value
Equipment 133,000 Value Value
Accumulated Depreciation - Equipment 28,000 (b) Value ? Value
Accounts Payable
48,500 Value Value
Notes Payable 60,000 Value Value
Owner's Capital 93,000 Value Value
Owner's Drawings 12,000 Value Value
Sales Revenue 755,200 Value Value
Sales Returns and Allowances 8,800 Value Value
Cost of Goods Sold 497,400 (d) Value Value Value
Salaries and Wages Expense 140,000 Value Value
Advertising Expense 24,400 Value Value
Utilities Expense 14,000 Value Value
Maintenance and Repairs Expense 12,100 Value Value
Freight-Out 16,700 Value Value
Rent Expense 24,000 Value Value
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Trial Balance
November 30, 2017
GAOLEE FASHION CENTER
Worksheet
Income
Statement
Balance Sheet
Account Titles
Trial Balance
Adjustments
Adjusted
Trial Balance
Totals 984,700 984,700
Supplies Expense
(a) Value Value
Depreciation Expense (b) Value Value
Interest Expense ( c) Value Value
Interest Payable ( c) Value Value Value
Totals ? ? ? ? ? ? ? ?
Net Loss ? Value
Totals ? ? ? ?
(b) Prepare a multiple-step income statement and an owner's equity statement for the year, and a classified
balance sheet as of November 30, 2017. Notes payable of $20,000 are due in January 2018.
Sales Revenue
Sales revenue Value
Less: Sales returns and allowances
Value
Net sales ?
Cost of goods sold Value
Gross profit ?
Operating expenses
Salaries and wages expense Value
Advertising expense Value
Rent expense Value
Freight-out Value
Utilities expense Value
Maintenance and repair expense Value
Depreciation expense Value
Supplies expense Value
Total operating expenses ?
Income from operations ?
Other expenses and losses
Interest expense Value
Net loss ?
Owner's Capital, December 1, 2016 Value
Less: Net loss Value
Drawings Value ?
Owner's Capital, November 30, 2017 ?
Assets
Current assets
Cash Value
Accounts Receivable Value
Inventory Value
Supplies Value
Total current assets ?
Property, plant and equipment
Equipment Value
Accumulated depreciation - Value ?
equipment
Total assets ?
Liabilities and Owner's Equity
Current liabilities
Account payable Value
Notes payable (due next year) Value
Interest payable Value
Total current liabilities ?
Long-term liabilities
Notes payable Value
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Balance Sheet
November 30, 2017
GAOLEE FASHION CENTER
Income Statement
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Owner's Equity Statement
Total liabilities ?
Owner's equity
Owner's capital Value
Total liabilities and owner's equity
?
(c ) Journalize the adjusting entries.
Nov. 30 Value
Account Value
Nov. 30 Value
Account Value
Nov. 30 Value
Account Value
Nov. 30 Value
Account Value
(d) Journalize the closing entries.
Nov. 30 Value
Account Value
Nov. 30 Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Nov. 30 Value
Account Value
Nov. 30 Value
Account Value
(e ) Prepare a post-closing trial balance.
Debit Credit
Cash Value
Accounts Receivable Value
Inventory Value
Supplies Value
Equipment Value
Less: Accumulated Depreciation - Equipment Value
Accounts payable Value
Notes payable Value
Interest payable Value
Owner's Capital Value
? ?
After you have completed the requirements of P5-5A, consider the additional question.
Answers are on the other tab in this file.
1. Assume that supplies on hand and Interest accrued changed to $3,000 and $4,600
respectively. How do these changes affect the financial statements?
Account
Account
GAOLEE FASHION CENTER
Post-closing Trial Balance
November 30, 2017
Account
Account
Account
Account
Account
Account
P5-5A Solution
(a) Enter the trial balance on a worksheet, and complete the worksheet.
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 20,700$ 20,700 20,700
Accounts Receivable 30,700 30,700 30,700
Owner's Drawings 12,000 12,000 12,000
Sales Revenue 755,200 755,200 755,200
Sales Returns and Allowances 8,800 8,800 8,800
Cost of Goods Sold 497,400 (d) 300 497,700 497,700
Salaries and Wages Expense 140,000 140,000 140,000
Advertising Expense 24,400 24,400 24,400
Supplies Expense (a) 3,600 3,600 3,600
Depreciation Expense (b) 11,500 11,500 11,500
(b) Prepare a multiple-step income statement and an owner's equity statement for the year, and a classified
balance sheet as of November 30, 2017. Notes payable of $20,000 are due in January 2018.
Sales Revenue
Sales revenue 755,200$
Less: Sales returns and allowances 8,800
Net sales 746,400
Cost of goods sold 497,700
Utilities expense 14,000
Maintenance and repair expense 12,100
Depreciation expense 11,500
Supplies expense 3,600
Adjusted
Owner's Equity Statement
Account Titles
Trial Balance
Adjustments
Trial Balance
GAOLEE FASHION CENTER
Income Statement
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Income
GAOLEE FASHION CENTER
Worksheet
For the Year Ended November 30, 2017
For the Year Ended November 30, 2017
Balance Sheet
Statement
Assets
Current assets
Cash $20,700
Accounts Receivable 30,700
Inventory 44,400
Supplies 2,600
Liabilities and Owner's Equity
Current liabilities
Account payable $48,500
Notes payable (due next year) 20,000
(c ) Journalize the adjusting entries.
Nov. 30
3,600
Supplies 3,600
(d) Journalize the closing entries.
Nov. 30
755,200
Income Summary 755,200
Nov. 30
756,600
Sales Returns and Allowances 8,800
Nov. 30
1,400
Income Summary 1,400
Supplies Expense
Sales Revenue
Income Summary
Owner's Capital
GAOLEE FASHION CENTER
Balance Sheet
November 30, 2017
(e ) Prepare a post-closing trial balance.
Debit Credit
Cash $20,700
Accounts Receivable 30,700
Inventory 44,400
GAOLEE FASHION CENTER
Post-closing Trial Balance
November 30, 2017
P5-5A Solution to additional question
1. Assume that supplies on hand and Interest accrued changed to $3,000 and $4,600 respectively.
How do these changes affect the financial statements?
(a) Enter the trial balance on a worksheet, and complete the worksheet.
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 20,700 20,700 20,700
Accounts Receivable 30,700 30,700 30,700
Inventory 44,700 (d) 300 44,400 44,400
Sales Revenue 755,200 755,200 755,200
Sales Returns and Allowances 8,800 8,800 8,800
Cost of Goods Sold 497,400 (d) 300 497,700 497,700
Salaries and Wages Expense 140,000 140,000 140,000
Supplies Expense (a) 3,200 3,200 3,200
Depreciation Expense (b) 11,500 11,500 11,500
(b) Prepare a multiple-step income statement and an owner's equity statement for the year, and a classified
balance sheet as of November 30, 2017. Notes payable of $20,000 are due in January 2018.
Sales Revenue
Sales revenue $755,200
Less: Sales returns and allowances 8,800
Net sales 746,400
Cost of goods sold 497,700
Utilities expense 14,000
Maintenance and repair expense 12,100
Depreciation expense 11,500
Supplies expense
3,200
Total operating expenses 245,900
Owner's Capital, December 1, 2016 $93,000
For the Year Ended November 30, 2017
Balance Sheet
GAOLEE FASHION CENTER
Income Statement
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Owner's Equity Statement
Account Titles
Trial Balance
Adjustments
Trial Balance
Statement
Adjusted
Income
Worksheet
For the Year Ended November 30, 2017
GAOLEE FASHION CENTER
Assets
Current assets
Cash $20,700
Accounts Receivable 30,700
Inventory 44,400
Liabilities and Owner's Equity
Current liabilities
Account payable $48,500
GAOLEE FASHION CENTER
Balance Sheet
November 30, 2017
