Problem 5-8A Income statements-perpetual LO5 CHECK FIGURES: 1. Operating expense
ID: 2394056 • Letter: P
Question
Problem 5-8A Income statements-perpetual LO5 CHECK FIGURES: 1. Operating expenses $141,800; Profit$73,200 The following adjusted trial balance for Bell Servicing was prepared at the end of the fiscal year, Decem- ber 31, 2017 Credit 101 Cash 119 Merchandise inventory $ 8,000 16,200 128 Prepaid insurance 165 Store equipment 166 Accumulated depreciation, store equipment 167 Office equipment 168 Accumulated depreciation, office equipment 201 Accounts 301 Jonah Bell, capital 302 Jonah Bell, withdrawals 413 Sales 415 Sales discounts 505 Cost of goods sold 612 Depreciation expense, store equipment 613 Depreciation expense, office equipment. 622 Sales salaries expense 623 Office salaries expense 637 Insurance expense, store 638 Insurance expense, office 640 Rent expense, office space 641 Rent expense, selling space 651 Office supplies expense 652 Store supplies expense 655 Advertising expense 4,000 51,000 $ 46,800 34,200 16,000 41,000 291,800 2,000 74,800 5,200 3,800 46,000 32,000 2,000 1,600 13,000 17,000 1,200 2,400 17,600 $417,800 $417,800 Required 1. Prepare a classified multiple-step income statement that would be used by the business's owner (like Exhibit 5.13). 2. Prepare a multiple-step income statement that would be used by external users (like Exhibit 5.14). 3. Prepare a single-step income statement that would be provided to decision makers outside the company (like Exhibit 5.15). Analysis Component: If you were a decision maker external to Bell Servicing, which income statement format would you prefer and why, if you had a choice? Which income statement format(s) could you expect as an external user? Why?Explanation / Answer
1. Classified multiple-step income statement Bell Servicing Income Statement? For Year Ended December 31, 2017 Sales $291,800.00 Less: Sales Discount $2,000.00 Net Sales $289,800.00 Less: Cost Of Good Sold $74,800.00 Gross profit from sales $215,000.00 Operating expenses: Selling expenses: Sales salaries expense $46,000.00 Advertising expense $17,600.00 Rent expense, selling space $17,000.00 Store supplies expense $2,400.00 Insurance expense, store $2,000.00 Amortization expense, store equipment $5,200.00 ??Total selling expenses $90,200.00 ?General and administrative expenses: Office salaries expense $32,000.00 Rent expense, office space $13,000.00 Amortization expense, office equipment $3,800.00 Insurance expense, office $1,600.00 Office supplies expense $1,200.00 ??Total general and administrative expenses $51,600.00 Total operating expenses $141,800.00 Net Profit $73,200.00 2. Multiple-step income statement (External Users) Bell Servicing Income Statement? For Year Ended December 31, 2017 Net Sales $289,800.00 Less: Cost Of Good Sold $74,800.00 Gross profit from sales $215,000.00 Operating expenses: Salaries expense $78,000.00 Advertising expense $17,600.00 Rent expense $30,000.00 Supplies expense $3,600.00 Insurance expense $3,600.00 Amortization expense $9,000.00 Total operating expenses $141,800.00 Net Profit $73,200.00 3. Single-step income statement Bell Servicing Income Statement? For Year Ended December 31, 2017 Revenues: Net Sales $289,800.00 Expenses: ?Cost of goods sold $74,800.00 ?Selling expenses $90,200.00 ?General and administrative expenses $51,600.00 ??Total expenses $216,600.00 Net income $73,200.00 If I were a decision maker external to Bell Servicing, I would prefer the classified multi-step income statement format because it provides the greatest level of detail of the three income statement formats. As an external user, I would expect the single-step income statement format because it provides information but without giving details that might provide Bell’s competition with an edge.