Assignemnt

The following review problem will give you the opportunity to apply what you have learned by preparing both
an income statement and a balance sheet. The following items, listed in alphabetical order, are taken from
the records of Grizzly Inc., a chain of outdoor recreational stores in the Northwest. Use the items to prepare
two statements. First, prepare an income statement for the year ended December 31, 2010. The income
statement should be in multiple-step form. Second, prepare a classified balance sheet at December 31, 2010.
All amounts are in thousands of dollars.

Accounts payable Rs. 6,500 Income tax expense

Accounts receivable 8,200 Insurance expense
Accumulated depreciation 25,000 Interest expense
—buildings

Accumulated depreciation 15,000 Interest payable

—furniture and fixtures

Advertising expense 3,100 Interest revenue

Buildings
Capital stock, Rs. 1 par,
10,000 shares issued and
outstanding
Cash
Commissions expense
Cost of goods sold
Depreciation on buildings
80,000 Land
10,000 Long-term notes payable, due December 31, 2018
2,400 Merchandise inventories
8,600 Office supplies
110,000 Paid-in capital in excess of par value
2,500 Prepaid rent

Depreciation on furniture
and fixtures
Furniture and fixtures
Income taxes payable
1,200 Rent expense for salespeople's autos
68,000 Retained earnings
2,200 Salaries and wages for office staff
Sales revenue

Solution
a. Multiple-step income statement
rned by preparing both
order, are taken from
e the items to prepare
1, 2010. The income
at December 31, 2010.

Rs. 13,000
2,000
12,000

1,000

2,000
100,000

120,000

6,000
900
40,000
3,000

9,000
48,800
11,000
190,000
 Income Statement
for the year ended December 31, 2010
Particulars Amount Amount
Sales revenue 190,000
Less: Cost of goods sold 110,000
Gross margin/profit 80,000
Less: Opearting expenses
General and admin. Expenses
Salary of office staff 11,000
Dereciation expenses on buildings, furniture and
fixtures 3,700
Insurance expenses 2,000
Total general and admin expenses 16,700
Selling and distribution expenses
Advertisement expenses 3,100
Commission expenses 8,600
Rent expense for salespeople's autos 9,000
Total selling and distribution expenses 20,700
Total operating expenses 37,400
Operating profit 42,600
Add: Other income and gains
Interest revenue 2,000
Interest/dividend/ rent income 2,000
Less: Other expenses and losses
Interest expenses 12,000 12,000
Net income before tax 32,600
Less: Tax expenses (30%) 13,000
Net income after tax 19,600
 Classified balance sheet
at December 31, 2010
Assets Amount Amount
Current aseets
Cash 2,400.00
Accounts receivable 8,200.00
Merchandise inventories 6,000.00
Office supplies 900.00
Prepaid rent 3,000.00
Total current assets 20,500.00
Investment
Buildings 80,000.00
less: Accumulated depreciation—buildings (25,000.00)
Furniture and fixtures 68,000.00
less: Accumulated depreciation—furniture and
fixtures (15,000.00)
Land 100,000.00
Plant property and equitment 208,000.00
Total assets 228,500.00

Liabilities and capital stock

Current liabilities
Accounts payable 6,500.00
Income taxes payable 2,200.00
Interest payable 1,000.00
Total current liabilites 9,700.00
Long term lliabilites
Long-term notes payable, due December 31,
2018 120,000.00
total long term liabilites 120,000.00
Capital stock, Rs. 1 par, 10,000 shares issued and
outstanding 10,000.00
Paid-in capital in excess of par value 40,000.00
Total contributed capital 50,000.00
Reatained earnings 48,800.00
Total contributed capital and retained eanrings 98,800.00
total liabilties and capital stock 228,500.00