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 Oth

Preparing a Multiple‐Step Income Statement

Purpose of Assignment 

The purpose of this assignment is to help you become familiar with the parts of the multiple‐step income statement. 

Assignment Steps 

Resources: Financial Accounting: Tools for Business Decision Making 

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 700 words. Assume a 25% tax rate. 

Show your work on the Excel® spreadsheet and submit with your explanation.