Acc290 Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years. SIMON COMPANY Income Statement For the Year Ended December 31, 2017 Revenues Net sale

  

Acc290

Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years.

   

SIMON COMPANY

Income Statement
   For the Year Ended December 31, 2017

 

Revenues

 

Net sales

$850,000

 

Other revenues

22,000

  

872,000

 

Cost of goods sold

555,000

 

Gross profit

317,000

 

Operating expenses

 

Selling expenses

109,000

 

Administrative expenses

103,000

  

212,000

 

Net earnings

$105,000

As an experienced, knowledgeable accountant, you review the statement and determine the following facts:

1. Net sales consist of: sales $911,000, less freight-out      on merchandise sold $33,000, and sales returns and allowances $28,000.
2. Other revenues consist of sales discounts $18,000 and      rent revenue $4,000.
3. Selling expenses consist of salespersons' salaries      $80,000, depreciation on equipment $10,000, advertising $13,000, and sales      commissions $6,000. The commissions represent commissions paid. At      December 21, $3,000 of commissions have been earned by salespersons but      have not been paid. All compensation should be recorded as Salaries and      Wages Expense.
4. Administrative expenses consist of office salaries      $47,000, dividends $18,000, utilities $12,000, interest expense $2,000,      and rent expense $24,000, which includes prepayments totaling $6,000 for      the first quarter of 2018. 

Prepare a detailed multi-step income statement with a brief explanation of 500 words. Assume a 25% tax rate. 

Show your work on the Excel® spreadsheet and submit with your explanation. The analysis part can be submitted in a separate Word file. Please review assignment grading guide located in student materials for details and points assigned between content and writing guidelines.

Click the Assignment Files tab to submit your assignment.