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Preparing a Multiple Step Income Statement, Slides of Accounting

When doing a multiple step income statement, one must remember the key elements. They are: Net Sales, Cost of Goods Sold, Gross Profit, Total Operating.

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This instructional aid was prepared by the Tallahassee Community College Learning Commons.
Preparing a Multiple Step Income Statement
The adjusted trial Balance for the Year ended December 31, 2010, For ELM
Company is shown below:
ELM Company
Adjusted Trial Balance
For the Year ended December 31, 2010
Items
Dr
Cr
Cash
14,500
blank
Accounts Receivable
11,100
blank
Merchandise Inventory
29,000
blank
Prepaid Insurance
2,500
blank
Store Equipment
95,000
blank
Accumulated Depreciation
blank
18,000
Notes Payable
blank
25,000
Accounts Payable
blank
10,600
Common Stock
blank
70,000
Retained Earnings
blank
11,000
Dividends
12,000
blank
Sales
blank
536,800
Sales Returns and Allowances
6,700
blank
Sales Discounts
5,000
blank
Cost of Goods Sold
363,400
blank
Freight-Out
7,600
blank
Advertising Expense
12,000
blank
Store Salaries Expense
56,000
blank
Utilities Expense
18,000
blank
Rent Expense
24,000
blank
Depreciation Expense
9,000
blank
Insurance Expense
4,500
blank
Interest Expense
3,600
blank
Interest Revenue
blank
2,500
Total
673,900
673,900
Instructions: Given this data, prepare a multiple-Step Income statement
for ELM Company, assuming a tax rate of 30%.
What to do: Remember to always label your Income statements with the
company name, Income statement and for period ending. When doing a
multiple step income statement, one must remember the key elements.
They are: Net Sales, Cost of Goods Sold, Gross Profit, Total Operating
Expenses, net gain/loss from other activities, Income before taxes, Income
tax expense, and Net Income. These items will be listed on the right hand
column of the income statement, and help us understand which accounts we
use in what order.
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This instructional aid was prepared by the Tallahassee Community College Learning Commons.

Preparing a Multiple Step Income Statement

The adjusted trial Balance for the Year ended December 3 1, 20 10, For ELM Company is shown below: ELM Company Adjusted Trial Balance For the Year ended December 3 1, 2010 Items Dr Cr Cash (^14) , (^500) blank Accounts Receivable (^11) , (^100) blank Merchandise Inventory (^29) , (^000) blank Prepaid Insurance (^) 2, (^500) blank Store Equipment (^95) , (^000) blank Accumulated Depreciation (^) blank 18 , 000 Notes Payable (^) blank 25 , 000 Accounts Payable (^) blank 10 , 600 Common Stock (^) blank 70 , 000 Retained Earnings (^) blank 11 , 000 Dividends (^12) , (^000) blank Sales (^) blank 53 6, 800 Sales Returns and Allowances (^) 6, (^700) blank Sales Discounts (^) 5, (^000) blank Cost of Goods Sold (^36) 3, (^400) blank Freight-Out (^) 7, (^600) blank Advertising Expense (^12) , (^000) blank Store Salaries Expense (^56) , (^000) blank Utilities Expense (^18) , (^000) blank Rent Expense (^24) , (^000) blank Depreciation Expense (^) 9, (^000) blank Insurance Expense (^) 4, (^500) blank Interest Expense (^) 3, (^600) blank Interest Revenue (^) blank 2, 500 Total (^673) , 900 673 , 900 Instructions: Given this data, prepare a multiple-Step Income statement for ELM Company, assuming a tax rate of 30 %. What to do: Remember to always label your Income statements with the company name, Income statement and for period ending. When doing a multiple step income statement, one must remember the key elements. They are: Net Sales, Cost of Goods Sold, Gross Profit, Total Operating Expenses, net gain/loss from other activities, Income before taxes, Income tax expense, and Net Income. These items will be listed on the right hand column of the income statement, and help us understand which accounts we use in what order.

This instructional aid was prepared by the Tallahassee Community College Learning Commons. First, we start by determining Net Sales. This is done by taking sales and subtracting sales returns and allowances and sales discounts. Then, we subtract Cost of Goods Sold from Net Sales to determine Gross Profit. Next, we total our operating expenses (which are expenses related to operating the business), and subtract them from our Gross Profit to find our Operating Income. Then, we add any other revenues/gains and subtract any other expenses/losses. This gives us our income by taxes. Multiplying this number by the tax rate gives us our Income tax expense, which when we subtract the two gives us our Net Income, the end goal.

Solution

ELM Company For the Year ended December 3 1, 2010