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Chapter 5: Q5-5TI (page 271)

Question: Capital City Motorcycle’s selected accounts as of December 31, 2018, follow:

Selling Expenses $ 10,500

Interest Revenue 1,000

Net Sales Revenue 113,500

Cost of Goods Sold 85,000

Administrative Expenses 8,000

Prepare the multi-step income statement for the year ended December 31, 2018.

Short Answer

Expert verified

The net income of the company is $11,000.

Step by step solution

01

Meaning of Multi-step Income Statement

A multi-step income statement refers to a report that bifurcates the business's operational and non-operational activities. The operating section reports the core events of the company, and the non-operating section captures the secondary events.

02

Preparation of multi-step income statement

In the books of Capital City Motorcycle

Multi-step Income Statement

For the year ended December 31, 2018

Particulars

Amounts ($)

Net sales revenue

113,500

Less: Cost of goods sold

(85,000)

Gross profit

28,500

Operating expenses

Less: Selling expenses

(10,500)

Less: Administrative expenses

(8,000)

Income from operations

10,000

Other revenues and gains

Add: Interest revenue

1,000

Net income

11,000

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Most popular questions from this chapter

What financial statement is merchandise inventory reported on, and in what section?

Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.

Requirements

1. Journalize the adjustment for inventory shrinkage.

2. Journalize the adjustment for estimated sales returns.

The adjusted trial balance of Quality Office Systems at March 31, 2018, follows:

Journalize the following transactions that occurred in September 2018 for Cardinal. Assume Cardinal uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Sep. 3 Purchased merchandise inventory on account from Sherry Wholesalers, \(4,000. Terms 1/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)75 on September 3 purchase.

4 Purchased merchandise inventory for cash of \(1,900.

6 Returned \)1,100 of inventory from September 3 purchase.

8 Sold merchandise inventory to Houston Company, \(5,500, on account. Terms 3/15, n/35. Cost of goods, \)2,365.

9 Purchased merchandise inventory on account from Tarin Wholesalers, \(12,000. Terms 3/10, n/30, FOB destination.

10 Made payment to Sherry Wholesalers for goods purchased on September 3, less return and discount.

13 After negotiations, received a \)200 allowance from Tarin Wholesalers.

15 Sold merchandise inventory to Java Company, \(3,300, on account. Terms 2/10, n/EOM. Cost of goods, \)1,320.

22 Made payment, less allowance, to Tarin Wholesalers for goods purchased on September 9.

25 Sold merchandise inventory to Smecker for \(1,900 on account that cost \)722. Terms of 1/10, n/30 were offered, FOB shipping point. As a courtesy to Smecker, $85 of freight was added to the invoice for which cash was paid by Cardinal.

28 Received payment from Houston Company.

29 Received payment from Smecker, less discount.

30 Received payment from Java Company.

Describe the journal entry(ies) when recording a sale of inventory using the periodic inventory system.
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