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-   -   Multiple Step Income Statement (https://www.askmehelpdesk.com/showthread.php?t=141351)

  • Oct 16, 2007, 10:12 AM
    carmen2143
    Multiple Step Income Statement
    This is my first time using this site but I am desperate. I am calculating Multiple Step Income Statement and want make sure if everything is in the right place. Did I do this right? :confused:


    They gave me this information:

    Sales 650,000
    Purchases discounts 9,000
    Purchases 376000
    Earthquake loss 57000
    Selling Expense 57000
    Error in depreciation Expense for 2006 (to correct error, depr. Exp. Is reduced) 25000
    Accounts receivable 45000
    Common Stock 100000
    Accumulated Depreciation 87000
    Dividend Income 5500
    Inventory- January 1,2008+ 76000
    Inventory-December 31, 2008 62500
    Unearned service Revenue 2000
    Accrued interest Payable 500
    Land 185000
    Patents 50,000
    Retained Earning-January 1,2008 195000
    Interest Expense (other item) 8500
    General and Administrative 70000
    Dividends declared 2500
    Allowance for doubtful accounts 2500
    Notes Payable 100,000
    Machinery and Equipment 225,000
    Materials and Supplies 20,000
    Accounts Payable 30,000
    Loss from dicontinued operations 40,0000


    The amount of income taxes applicable to income from operations was $62,000. The tax effect of the earthquake loss amounted to $19,000. The tax effect of the discontinued operating loss was $20,000. The tax effect of the depreciation error was $10,000.

    This is what I did:

    :confused: Sales Revenue 65000
    Cost of Good Sold:
    Inventory-January 1,2008 76000
    Purchases 376000
    Less: Purchases Discounts (9000)
    Net Purchases 367000
    Total Inventory available for sale 443000
    Less: Inventory-December 31,2008 62500
    Cost of Good Sold 380000
    Gross Profit on Sales 270000
    Operating Expenses:
    Selling Expenses 71000
    General and Administrative Expenses 70000
    Material and Supplies 20000
    Total Operating Expenses 161000
    Other Income (Expense):
    Error in Depreciation Expense for 2006 (25000)
    Interest Expense (8500)
    Dividend Income (5500)
    Income from continuing operations before
    Income taxes and extraordinary item 133000
    Income Tax Expense (62000)
    Income from continuing operations
    After income taxes 71000

    Discontinued Operations:
    Loss from discontinued operations (40000)
    Income tax benefit 20000
    Loss on discontinued operations (20000)
    Income before extraordinary item 51000
    Extraordinary item
    Earthquake loss (57000) -
    Net Loss (6000)
  • Oct 16, 2007, 12:59 PM
    santys72
    Quote:

    Originally Posted by carmen2143
    This is my first time using this site but I am desperate. I am calculating Multiple Step Income Statement and want make sure if everything is in the right place. Did I do this right? :confused:


    They gave me this information:

    Sales 650,000
    Purchases discounts 9,000
    Purchases 376000
    Earthquake loss 57000
    Selling Expense 57000
    Error in depreciation Expense for 2006 (to correct error, depr. Exp. is reduced) 25000
    Accounts receivable 45000
    Common Stock 100000
    Accumulated Depreciation 87000
    Dividend Income 5500
    Inventory- January 1,2008+ 76000
    Inventory-December 31, 2008 62500
    Unearned service Revenue 2000
    Accrued interest Payable 500
    Land 185000
    Patents 50,000
    Retained Earning-January 1,2008 195000
    Interest Expense (other item) 8500
    General and Administrative 70000
    Dividends declared 2500
    Allowance for doubtful accounts 2500
    Notes Payable 100,000
    Machinery and Equipment 225,000
    Materials and Supplies 20,000
    Accounts Payable 30,000
    Loss from dicontinued operations 40,0000


    The amount of income taxes applicable to income from operations was $62,000. The tax effect of the earthquake loss amounted to $19,000. The tax effect of the discontinued operating loss was $20,000. The tax effect of the depreciation error was $10,000.

    This is what I did:

    :confused: Sales Revenue 65000
    Cost of Good Sold:
    Inventory-January 1,2008 76000
    Purchases 376000
    Less: Purchases Discounts (9000)
    Net Purchases 367000
    Total Inventory available for sale 443000
    Less: Inventory-December 31,2008 62500
    Cost of Good Sold 380000
    Gross Profit on Sales 270000
    Operating Expenses:
    Selling Expenses 71000
    General and Administrative Expenses 70000
    Material and Supplies 20000
    Total Operating Expenses 161000
    Other Income (Expense):
    Error in Depreciation Expense for 2006 (25000)
    Interest Expense (8500)
    Dividend Income (5500)
    Income from continuing operations before
    income taxes and extraordinary item 133000
    Income Tax Expense (62000)
    Income from continuing operations
    after income taxes 71000

    Discontinued Operations:
    Loss from discontinued operations (40000)
    Income tax benefit 20000
    Loss on discontinued operations (20000)
    Income before extraordinary item 51000
    Extraordinary item
    Earthquake loss (57000) -
    Net Loss (6000)

    Previous years Accounting errors are reported in Retained Earnings. They are reported as adjustement to the beginning balance of retained earnings. Accouting errors are not part of Income from continuing Operations. Accounting errors are treated retrospectively and if comparative financial statements are presented, they need to be restated.

    That was the only thing I saw.
  • Oct 17, 2007, 10:24 AM
    carmen2143
    Thanks for your help!

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