COMPONENTS OF THE MULTIPLE-STEP INCOME STATEMENT Ren Ren Merchandising Income Statement For year ended December 31, 2017 Note Net Sales 1 es Cost of Sales 2 ee Gross Profit Px Other Income 3 nr Total Income aay Operating Expenses Distribution Expenses 4 Prox ‘Administrative Expenses 5 xxx Other Expenses 6 Xxx Finance Cost xXx 00% Foor Net IncomeNet Sales ‘The first line after the heading of the income statements the net sales. To show the details of its computation, it is supported by a note to financial statement. Net sales is computed as follows: Gross Sales Pax Less: Sales Returns & Allowances Pex Sales Discount 30% xxx Net Sales Pox Cost of Sales The cost of sales or cost of goods sold represents the cost of merchandise inventory sold by the business to its customers. This comprises the company’s biggest expense and is deducted from net sales to arrive at the gross profit. Computation of cost of sales is as follows: Merchandise Inventory, Beginning Prox Add: Net Cost of Purchases Purchases Prox Less: Purchase Returns & Allowances Px Purchase Discount x XXX Net Purchases Prox Add: Freight-in Xxx Goods Available for Sale Prox Less: Merchandise Inventory, End Xxx Cost of Sales Prax Other Income Other income is income derived from sources other than the company's main line of business. Examples are interest income, dividends income, commissions income, rent income, and gain on. sale of assets, To show the details of this income account, it is supported by a note to financial statement.Distribution Expenses / Selling Expenses Selling expenses are those incurred in directly selling the merchandise. This includes salaries of sales personnel, expenses incurred in promoting or advertising the product, commissions on sales, store supplies used, utilities used in the store, depreciation expense of assets used in the store and the cost of transporting the merchandise to the customer's place of business under the account title freight-out or delivery expense. General / Administrative Expenses General or administrative expenses are expenses necessary in the management of the office. This includes the salaries of office personnel, office supplies used, utilities used in.the office, depreciation of office assets and the provision for bad debts or uncollectible accounts. Note: If the business has a small office, does not maintain a store, and sales are also made in the office, operating expenses need not be categorized under selling and administrative expenses. Other Expenses Other Expenses are expenses not connected to the operating activities of the business. An example of this is loss on sale of assets and discount lost, Finance Cost Finance Cost are the interest expense paid for the use of borrowed funds.Illustrative Problem ‘The following account balances are taken from the books of Ren Ren Merchandising on December 31, 2016. Sales 782,000 Sales Returns & Allowances 32,000 Sales Discount 48,000 Purchases 220,000 Purchase Returns & Allowances 34,000 Purchase Discount 26,000 Freight-in 10,000 Merchandise Inventory, Beginning 180,000 Merchandise Inventory, End 120,000 Sales Salaries Expense 52,000 Depreciation Expense - Store Equipment 7,800 Utilities Expense - Store 6,000 Office Salaries Expense 34,000 Utilities Expense - Office 4,400 Office Supplies 3,000 Bad Debts Expense 2,000 Interest Expense 2,400 Loss on Sale of Equipment 1,600 Discount Lost 1,000 Interest Income 30,000 Rent Income 20,000Ren Ren Merchandising Income Statement For year ended December 31, 2016 Note Net Sales 1 Cost of Sales 2 Gross Profit Other Income 3 Total Income Operating Expenses Distribution Expenses 4 65,800 Administrative Expenses 5 43,400 Other Expenses 6 2,600 Finance Cost 7 2,400 Net Income Note 1 - Net Sales Gross Sales Less: Sales Returns & Allowances 32,000 Sales Discount 48,000 Net Sales Note 2 - Cost of Sales Merchandise Inventory, Beginning Add: Net Cost of Purchases Purchases Less: Purchase Returns & Allowances 34,000 Purchase Discount 26,000 Net Purchases Add: Freight-in Goods Available for Sale Less: Merchandise Inventory, End Cost of Sales 220,000 60,000 160,000 10,000 702,000 230,000 ‘P472,000 50,000 P522,000 114,200 407,800 782,000 — 80,000 702,000 180,000 170,000 350,000 120,000 hat 10Note 3 - Other Income Interest Income Rent Income Total Note 4 - Distribution Expenses Sales Salaries Expense Depreciation Expense ~ Store Equipment Utilities Expense ~ Store Total Note 5 - Administrative Expenses Office Salaries Expense Utilities Expense - Office Office Supplies Bad Debts Expense Total Note 6 - Other Expenses Loss on Sale of Equipment Discount Lost Total Note 7 - Finance Cost Interest Expense 30,000 20,000 50,000 52,000 7,800 6,000 65,800 34,000 4,400 3,000 2,000 43,400 1,600The following are accounts taken from the books of Wei Long Trading for year ended December 31, 2017. Complete the income statement based on the given facts. Sales 450,000 Purchases 284,000 Inventory, Jan. 1 80,000 Sales Returns and Allowances 18,000 Sales Discount 12,000 Purchase Returns and Allowances 14,000 Purchase Discount 12,000 Freight-in 6,000 Inventory, Dec. 31 88,000 Advertising Expense 18,000 Sales Salaries 74,000 Freight-out 14,200 Utilities Expense - Store 2,800 Store Supplies 6,000 Office Salaries 22,000 Utilities Expense - Office 4,800 Office Supplies 2,400 Doubtful Accounts Expense 7,200 Dividends Income 50,000 Rent Income 40,000 Interest Expense 16,000 Discount Lost 1,600Gecko Use the following information to prepare a multiple-step income statement, including the revenue section and the cost of goods section, for FipEly Office Supplies for the year ended December 31, 2017. Sales 1,485,400 Sales Returns and Allowances 13,800 Sales Discounts 21,660 Merchandise Inventory, January 1, 2017 265,000 Purchases 980,000 Purchase Returns and Allowances 21,800 Purchases Discounts 19,600 Freight-in 7,500 Merchandise Inventory, December 31, 2017 332,500 Salaries Expense 238,000 Supplies Expense 9,000 Utilities Expense 70,000 Insurance Expense 10,000 Depreciation Expense ~ Equipment 31,000 Miscellaneous Expense 7,200 Rent Expense 49,800Use the following information to prepare a multiple-step income statement, including the revenue section and the cost of goods sold section, for Teena’s Buddy Depot for the year ended December 31, 2017. Sales P664,000 Sales Returns and Allowances 6,480 Sales Discounts 13,280 Merchandise Inventory, Beginning 180,000 Purchases 445,200 Purchase Returns and Allowances 14,400 Purchases Discounts 8,904 Freight-in 2,560 Merchandise Inventory, End 118,400 Distribution Expenses Sales Salaries Expense 48,000 Advertising Expense 5,684 Administrative Expenses Office Salaries Expense 40,000 ‘Supplies Expenses 2,600 Utilities Expense 36,000 Insurance Expense 4,000 Depreciation Expense - Building 11,000 Depreciation Expense - Equipment 10,000Gersate Based on the information that follows, prepare the multiple-step income statement of Jean Riory’s Trading for year ended October 31,2017. Sales 1,100,00 Sales Returns and Allowances 32,500 Sales Discount 40,000 Merchandise Inventory, Beginning 70,000 Merchandise Inventory, End 40,000 Purchases 562,500 Purchase Returns and Allowances 33,750 Purchase Discount 11,250 Freight-in 6,000 Discount Lost 3,000 Loss on Sale of Equipment 1,500 Interest Expense 1,200 Distribution Expenses Store Utilities Expense 100,000 Advertising Expense 150,000 Store Salaries Expense 17,000 Depreciation Expense - Store Furniture and Fixtures 6,000 Administrative Expenses Office Salaries Expense 11,250 Depreciation Expense ~ Office Furniture and Fixtures 3,000 Supplies Expense 2,000 Rent Expense 22,000 Bad Debts Expense 4,500 Office Utilities Expense 18,750