3. Collins Co. had the following account balances: Sales revenue $ 1,000,000 Cos
ID: 2589352 • Letter: 3
Question
3. Collins Co. had the following account balances:
Sales revenue $ 1,000,000
Cost of goods sold 400,000
Salaries and wages expense 75,000
Depreciation expense 30,000
Dividend revenue 10,000
Utilities expense 15,000
Rent revenue 30,000
Interest expense 18,000
Sales returns and allow. 45,000
Advertising expense 19,500
Loss from discontinued operations 20,000
The tax rate for Collins Co. is 25%.
a. Prepare a single step income statement
b. Prepare a multiple step income statement
Explanation / Answer
a. Single step income statement Revenues and Gains: Sales revenue 1000000 Less:Sales returns and allowance 45000 Net sales 955000 Dividend revenue 10000 Rent revenue 30000 Total revenues and Gains (A) 995000 Expenses and losses: Cost of goods sold 400000 Salaries and wages expense 75000 Depreciation expense 30000 Utilities expense 15000 Interest expense 18000 Advertising expense 19500 Total Expenses and losses (B) 557500 Pre-tax income (A)-(B) 437500 Less: Tax @ 25% 109375 Income from continuing operations 328125 Loss from discontinued operations (net of tax-20000*75%) -15000 Net income 313125 b. Multi step income statement Revenues and Gains: Sales revenue 1000000 Less:Sales returns and allowance 45000 Net sales 955000 Less:Cost of goods sold 400000 Gross profit 555000 Less:Operating expenses Salaries and wages expense 75000 Depreciation expense 30000 Utilities expense 15000 Advertising expense 19500 Total Operating expenses 139500 Operating income 415500 Less:Non-operating or other Interest expense -18000 Dividend revenue 10000 Rent revenue 30000 Total 22000 Pre-tax income 437500 Less: Tax @ 25% 109375 Income from continuing operations 328125 Loss from discontinued operations (net of tax-20000*75%) -15000 Net income 313125
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