The accountant of Latifa Shoe Co. has compiled the following information from th
ID: 2420290 • Letter: T
Question
The accountant of Latifa Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2014. Rent revenue $30,720 Interest expense 19,720 Market appreciation on land above cost 32,720 Salaries and wages expense (selling) 116,520 Supplies expense (selling) 19,320 Income tax 39,120 Salaries and wages expense (administrative) 137,620 Other administrative expenses 53,420 Cost of goods sold 497,720 Net sales 981,720 Depreciation on plant assets (70% selling, 30% administrative) 66,720 Cash dividends declared 17,720 There were 19,800 shares of common stock outstanding during the year. Collapse question part (a) Prepare a multiple-step income statement b) prepare single step income and sta
Explanation / Answer
Answer:
(a) Multiple-Step Form
Latifa Shoe Co.
Income Statement
For the Year Ended December 31, 2014
Net sales.............................................................................
$981,720
Cost of goods sold.............................................................
497,720
Gross profit on sales.........................................................
484,000
Operating Expenses
Selling expenses
Wages and salaries................................................
$116,520
Depr. exp. (70% X $66,720).................................
46,704
Materials and supplies..........................................
19,320
$182,544
Administrative expenses
Wages and salaries................................................
137,620
Other admin. expenses.........................................
53,420
Depr. exp. (30% X $66,720).................................
20,016
211,056
393,600
Income from operations...................................................
90,400
Other Revenues and Gains
Rental revenue............................................................
30,720
121,120
Other Expenses and Losses
Interest expense...........................................................
19,720
Income before income tax................................................
101,400
Income tax...................................................................
39,120
Net income.........................................................................
$ 62,280
Earnings per share ($62,280 ÷ 19,800)............................
$3.15
(b) Single-Step Form
Latifa Shoe Co.
Income Statement
For the Year Ended December 31, 2014
Revenues
Net sales.....................................................................................................
$ 981,720
Rental revenue..........................................................................................
30,720
Total revenues.....................................................................................
1,012,440
Expenses
Cost of goods sold.....................................................................................
497,720
Selling expenses.........................................................................................
182,544
Administrative expenses...........................................................................
211,056
Interest expense.........................................................................................
19,720
Total expenses.....................................................................................
911,040
Income before income tax..............................................................................
101,400
Income tax.................................................................................................
39,120
Net income.......................................................................................................
$ 62,280
Earnings per share ($62,280 ÷ 19,800)..........................................................
$3.15
Note: An alternative income statement format for the single-step form is to show income tax as part of expense, and not as a separate item.
(a) Multiple-Step Form
Latifa Shoe Co.
Income Statement
For the Year Ended December 31, 2014
Net sales.............................................................................
$981,720
Cost of goods sold.............................................................
497,720
Gross profit on sales.........................................................
484,000
Operating Expenses
Selling expenses
Wages and salaries................................................
$116,520
Depr. exp. (70% X $66,720).................................
46,704
Materials and supplies..........................................
19,320
$182,544
Administrative expenses
Wages and salaries................................................
137,620
Other admin. expenses.........................................
53,420
Depr. exp. (30% X $66,720).................................
20,016
211,056
393,600
Income from operations...................................................
90,400
Other Revenues and Gains
Rental revenue............................................................
30,720
121,120
Other Expenses and Losses
Interest expense...........................................................
19,720
Income before income tax................................................
101,400
Income tax...................................................................
39,120
Net income.........................................................................
$ 62,280
Earnings per share ($62,280 ÷ 19,800)............................
$3.15
(b) Single-Step Form
Latifa Shoe Co.
Income Statement
For the Year Ended December 31, 2014
Revenues
Net sales.....................................................................................................
$ 981,720
Rental revenue..........................................................................................
30,720
Total revenues.....................................................................................
1,012,440
Expenses
Cost of goods sold.....................................................................................
497,720
Selling expenses.........................................................................................
182,544
Administrative expenses...........................................................................
211,056
Interest expense.........................................................................................
19,720
Total expenses.....................................................................................
911,040
Income before income tax..............................................................................
101,400
Income tax.................................................................................................
39,120
Net income.......................................................................................................
$ 62,280
Earnings per share ($62,280 ÷ 19,800)..........................................................
$3.15
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