E5-10 Prepare multiple-step and single-step income statement

In its income statement for the year ended December 31,2015, Lemere Company reported the following
condensed data.

Operating Expenses $725,000 Interest revenue

Cost of goods sold 1,289,000 Loss on disposal of plant assets
Interest expense 70,000 Net sales

Instructions:
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) Multiple-step income statement

LEMERE COMPANY
Income Statement
For the Year ended December 31, 2015
Net sales $2,200,000
Cost of goods sold 1,289,000
Gross profit 911,000
Operating expenses 725,000
Income from operations 186,000
Other revenues and gains
Interest revenue $28,000
Other expenses and losses
Interest expense $70,000
Loss on disposal of plant assets 17,000 214,000 $87,000
Net income 127,000

(b) Single-step income statement

LEMERE COMPANY
Income Statement
For the Year ended December 31, 2015
Revenues
Net Sales $2,200,000
Interest revenue 28,000
Total revenues 2,228,000
 Expenses
Cost of goods sold $1,289,000
Operating expenses 725,000
Interest expense 70,000
Loss on disposal of plant assets 17,000
Total expenses $2,101,000
Net income 127,000

After you have completed the requirements of E5-10, consider the additional question.
Answers are on the other tab in this file.
1. Suppose cost of goods sold changed to $1,320,000. What impact does this have on net income,
as determined using both the multiple-step and single-step income statements?
ted the following

$28,000
17,000
2,200,000

in cells with a "?" .

ve on net income,
P5-1A Journalize purchase and sales transactions under a perpetual inventory system
Powell's Book Warehouse distributes hardcover books to retail stores and extend credit terms of 2/10, n/30 to all o
At the end of May, Powell's inventory consisted of books purchased for $1,800. During June, the following merchan
occurred.

June 1 Purchased books on account for $1,600 from Kline Publishers, FOB destination, terms 2/10, n/30.
The appropriate party also made a cash payment of $50 for the freight on this date.
3 Sold books on account to Reading Rainbow for $2,500. The cost of the books sold was $1,440.
6 Received $100 credit for books returned to Kline Publishers.
9 Paid Kline Publishers in full, less discount.
15 Received payment in full from Reading Rainbow.
17 Sold books on account to Blanco Books for $1,800. The cost of the books sold was $1,080.
20 Purchased books on account for $1,500 from Dietz Publishers, FOB destination, terms 2/15,n/30.
The appropriate party also made a cash payment of $50 for the freight on this date.
24 Received payment in full from Blanco Books.
26 Paid Dietz Publishers in full less discount.
28 Sold books on account to Reddy Bookstore for $1,400. The cost of the books sold was $850.
30 Granted Reddy Bookstore $120 credit for books returned costing $72.

Powell's Book Warehouse's chart of accounts includes the following: No.101 Cash, No.112, Accounts Receivable,
No.120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No.412 Sales Returns and Allowances, No. 414
Sales Discounts, and No. 595 Cost of Goods Sold.

Instructions
Journalize the transactions for the month of June for Powell's Book Warehouse using a perpetual inventory system.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

June 1 Inventory 1600

Accounts Payable 1600

3 Accounts Payable 2500

Sales Revenue 2500
`

3 Cost of Goods Sold 1440

Inventory 1440

6 Accounts Payable 100

Inventory 100
9 Accounts Payable 1500
Sales Discount 32
Cash 1568

15 Cash 1600
A\R 1600

17 A\R 1800
Sales Revenue 1800

17 Cost of Goods Sold 1080

Inventory 1080

20 Inventory 1500
Accounts Payable 1500

24 Cash 1980
Discount 20
A\R 2000

26 Accounts Payable 1500

Paid Discoun 30
Cash 1470

28 Cost of Goods Sold 850

Sales Revenue 850

28 A\R 1400
Sales Revenue 1400

30 Returns/Allowances 120
A\R 120
 30 Cost Of Goods Sold 72
Inventory 72

After you have completed the requirements of P5-1A, consider these additional questions.
Answers are on the other tab in this file.
1. Suppose that the June 1 purchase changed to $2,500. Redo the journal entries
affected by this change.
2. Suppose that the sale on June 28 changed to $3,000 and the cost of sale changed to
$1,200. Redo the journal entries affected by these changes.
ms of 2/10, n/30 to all of its customers.
the following merchandising transactions

rms 2/10, n/30.

was $1,440.

rms 2/15,n/30.

ccounts Receivable,
nd Allowances, No. 414

etual inventory system.

lls with a "?" .
P5-5A Complete accounting cycle beginning with a worksheet
The trial balance of Valdez Fashion Center contained the following account at November 30, the end of the comp

VALDEZ FASHION CENTER

Trial Balance
November 30, 2015
Debit Credit
Cash $ 8,700
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation - Equipment $ 28,000
Notes Payable 51,000
Accounts Payable 48,500
Common Stock 50,000
Retained Earnings 40,000
Dividends 12,000
Sales Revenue 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400
Salaries and Wages Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals 972,700 972,700

Adjustment Data:
1. Supplies on hand totaled $2,000.
2. Depreciation is $11,500 on the equipment.
3. Interest of $4,000 is accrued on notes payable at November 30.
4. Inventory actually on hand is $44,400.

Instructions
(a) Enter the trial balance on a worksheet, and complete the worksheet.
(b) Prepare a multiple-step income statement and a retained earnings statement for the year, and
a classified balance sheet as of November 30, 2015. Notes payable of $20,000 are due in January
(c ) Journalize the adjusting entries.
(d) Journalize the closing entries.
(e ) Prepare a post-closing trial balance.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a
(a) VALDEZ FASHION CENTER
Worksheet
For the Year Ended November 30, 2

Account Titles Trial Balance

Dr. Cr.

Cash $ 8,700
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation - Equipment 28,000
Notes Payable 51,000
Accounts Payable 48,500
Common Stock 50,000
Retained Earnings 40,000
Dividends 12,000
Sales Revenue 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400 (d)
Salaries and Wages Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals 972,700 972,700

Supplies Expense (a)

Depreciation Expense (b)
Interest Expense ( c)
Interest Payable
Totals
Net Loss
Totals

(b) VALDEZ FASHION CENTER

Income Statement
For the Year Ended November 30, 2015
Sales Revenue
Sales revenue $755,200
Less: Sales returns and allowances 8,800
Net sales 746,400
Cost of goods sold 497,700
Gross profit 248,700
Operating expenses
Salaries and wages expense $140,000
Advertising expense 24,400
Rent expense 24,000
Freight-out 16,700
Utilities expense 14,000
Maintenance and repair expense 12,100
Depreciation expense 11,500
Supplies expense 4,200
Total operating expenses 246,900
Income from operations 1,800
Other expenses and losses
Interest expense 4,000
Net loss $2,200

VALDEZ FASHION CENTER

Retained Earnings Statement
For the Year Ended November 30, 2015
Retained Earnings, December 1, 2014 $90,000
Less: Net loss $2,200
Dividends 12,000 14,200
Retained Earnings, November 30, 2015 $75,800

VALDEZ FASHION CENTER

Balance Sheet
November 30, 2015
Assets
Current assets
Cash $8,700
Accounts Receivable 30,700
Inventory 44,400
Supplies 2,000
Total current assets $ 85,800
Property, plant and equipment
Equipment $133,000
Accumulated depreciation - 39,500 93,500
equipment
Total assets $179,300
 Liabilities and Stockholder's Equity
Current liabilities
Notes payable (due next year) $20,000
Account payable 48,500
Interest payable 4,000
Total current liabilities $72,500
Long-term liabilities
Notes payable 31,000
Total liabilities 103,500
Stockholder's equity
Common stock 50,000
Retained earnings 75,800 75,800
Total liabilities and stockholder's equity $179,300

(c ) Adjusting entries:

Nov. 30 Supplies Expense 4,200

Expense

Nov. 30 Accumulated Depreciation 11,500

Equipment

Nov. 30 Interest Expense 4,000

Interest Payable

Nov. 30 Cost of Goods Sold 300

Inventory

(d) Closing entries:

Nov. 30 Sales Revenue 755,200

Income Summary

Nov. 30 Income Summary 757,400

Sales Returns and Allowances
Cost of Goods Sold
Salaries and Wages Expense
Advertising Expense
Utilities Expense
Maintenance and Repairs Expense
Freight-Out
Rent Expense
Supplies Expense
 Depreciation Expense
Interest Expense

Nov. 30 Account 2,200

Account

Nov. 30 Account 12,000

Account

(e ) VALDEZ FASHION CENTER

Post-closing Trial Balance
November 30, 2015
Debit Credit
Cash $8,700
Accounts Receivable 30,700
Inventory 44,400
Supplies 2,000
Equipment 133,000
Less: Accumulated Depreciation - Equipment $39,500
Notes Payable 51,000
Accounts Payable 48,500
Interest Payable 4,000
Common Stock
Retained Earnings 75,800
$218,800 218,800

After you have completed the requirements of P5-5A, consider the additional question.
Answers are on the other tab in this file.
1. Suppose that supplies on hand and Interest accrued changed to $3,000 and $4,600
respectively. How do these changes affect the financial statements?
ovember 30, the end of the company's fiscal year.

gs statement for the year, and

ble of $20,000 are due in January 2016.

mber or a formula in cells with a "?" .

 VALDEZ FASHION CENTER
Worksheet
r the Year Ended November 30, 2015
Adjusted Income
Adjustments Trial Balance Statement Balance Sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

8,700 8,700
30,700 30,700
(d) 300 44,400 44,400
(a) 4,200 2,000 2,000
133,000 133,000
(b) 11,500 39,500 39,500
51,000 51,000
48,500 48,500
50,000 50,000
40,000 40,000
12,000 12,000
755,200 755,200
8,800 8,800
300 497,700 497,700
140,000 140,000
24,400 24,400
14,000 14,000
12,100 12,100
16,700 16,700
24,000 24,000

4,200 4,200 4,200

11,500 11,500 11,500
4,000 4,000 4,000
( c) 4,000 4,000 4,000
20,000 20,000 988,200 988,200 757,400 755,200 230,800 233,000
2,200 2,200
757,400 757,400 233,000 233,000
 4,200

11,500

4,000

300

755,200

8,800
497,700
140,000
24,400
14,000
12,100
16,700
24,000
4,200
 11,500
4,000

2,200

12,000

00 and $4,600
P5-1B Journalize purchase and sales transactions under a perpetual inventory system
Urdan Co. distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers.
At the end of June, Urdan's inventory consisted of suitcases costing $1,200. During the month of July,
the following merchandising transactions occurred.
July 1 Purchased suitcases on account for $1,800 from Hostad Manufacturers, FOB destination,
terms 2/10, n/30. The appropriate party also made a cash payment of $100 for freight
on this date.
3 Sold suitcases on account to Kaye Satchels for $2,000. The cost of suitcases sold is $1,200.
9 Paid Hostad Manufacturers in full.
12 Received payment in full from Kaye Satchels.
17 Sold suitcases on account to The Going Concern for $1,800. the cost of the suitcases sold
was $1,080.
18 Purchased suitcases on account for $1,900 from Nelson Manufacturers, FOB shipping point,
terms 1/10,n/30. The appropriate party also made a cash payment of $125 for freight
on this date.
20 Received $300 credit (including freight) for suitcases returned to Nelson Manufacturers.
21 Received payment in full from The Going Concern.
22 Sold suitcases on account to Wopat's for $2,250. the cost of suitcases sold was $1,350.
30 Paid Nelson Manufacturers in full.
31 Granted Wopat's $200 credit for suitcases returned costing $120.

Urdan's chart of accounts includes the following: No.101 Cash, No.112 Accounts Receivable,
No.120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No.412 Sales Returns and Allowances, No.
Sales Discounts, and No. 595 Cost of Goods Sold.

Instructions
Journalize the transactions for the month of July for Urdan using a perpetual inventory system.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

July 1 Inventory 1,800

Accounts Payable 1,800

3 Accounts Receivable 2,000

Sales Revenue 2,000
`

3 Cost of Goods Sold 1,200

Inventory 1,200

9 Accounts Payable 1,800

Inventory 36
 Cash 1,764

12 Cash 1,980
Sales Discounts 20
Accounts Receivable 2,000

17 Accounts Receivable 1,800

Sales Revenue 1,800

17 Cost of Goods Sold 1,080

Inventory 1,080

18 Inventory 1,900
Accounts Payable 1,900

18 Inventory 125
Cash 125

20 Accounts Payable 300

Inventory 300

21 Cash 1,782
Sales Discounts 18
Accounts Receivable 1,800
`

22 Accounts Receivable 2,250

Sales Revenue 2,250

22 Cost of Goods Sold 1,350

Inventory 1,350

30 Accounts Payable 1,600

Cash 1,600

31 Sales Returns and Allowances 200

Accounts Receivable 200
 31 Inventory 120
Cost of Goods Sold 120

After you have completed the requirements of P5-1B, consider these additional questions.
Answers are on the other tab in this file.
1. Suppose that the July 3 sale and cost of sale changed to $2,800 and $1,500 respectively.
Redo journal entries affected by these changes.
2. Suppose that the purchase on July 18 changed to $2,600. Redo the journal entries affected by these c
30 to all of its customers.
the month of July,

FOB destination,
100 for freight

ses sold is $1,200.

he suitcases sold

FOB shipping point,

25 for freight

Manufacturers.

ld was $1,350.

Returns and Allowances, No. 414

ory system.
cells with a "?" .
00 respectively.

nal entries affected by these changes.