Question

Please prepare the multi-step income statement, the statement of stockholders' equity and the classified balance sheet.

Answer 1

Answer:

Operating Income = $53,000

Net Income = $39,000

Ending balance of common stock = $300,000

Ending balance of retained earnings = $95,000

Ending total stockholders' equity = $395,000

Total current assets = $198,000

Net long-term assets = $265,000

Total long-term assets = $285,000

Total assets = $463,000

Total liabilities = 68,000

Explanation:

a. Multi-step Income Statement

Multi-step Income Statement put each revenues and expenditures items into different categories to show gross profit and net income. This can be prepared as follows:

Multi-step Income Statement

For the year ended

Details                                                        $        

Sales Revenue                                     545,000

Sales Discount                                    (45,000)  

Net Sales Revenue                             500,000  

Cost of Goods Sold                            (400,000)

Gross profit                                          100,000

Operating expenses:

Rent Expense                                       (12,000)

Depreciation Expense                         (10,000)

Salaries Expenses                               (25,000)  

Operating Income                                53,000

Non-operating expenses:

Interest Expense                                  (6,000)

Income before tax                                 47,000

Income Tax Expense                             (8,000)

Net income                                            39,000

Dividend paid                                        (4,000)  

Retained earning for the year             35,000

b. Changes in Retained Earnings

Details                                                          $          

Beginning retained earnings                60,000

Retained earning for the year               35,000

Ending retained earnings                    95,000

c. Movement in Common Stock                

Details                                                                  $          

Beginning balance of common stock         250,000

Additional shares issued                                50,000

Ending balance of common stock             300,000

c. Statement of stockholders' equity

Details                                                                  $          

Beginning balance of common stock         250,000

Additional shares issued                                50,000

Ending balance of common stock               300,000

Ending retained earnings                              95,000  

Ending total stockholders' equity              395,000  

d. Classified Balance Sheet

Classified balance sheet shows each of the componets of assets, liabilities and equity. This can be prepared as follows:

Classified Balance Sheet

As at the year ended

Details                                                      $                     $          

Long-Term Assets

Buildings                                           65,000

Equipment                                     220,000  

Total Long-Term Assets                285,000

Accumulated Depreciation             20,000

Net Long-Term Assets                                                265,000

Current Assets

Cash                                                  12,000

Accounts Receivable                     150,000

Supplies                                           36,000

Total Current Assets                                                   198,000

Total Assets                                                                  463,000

Financed by:

Ending total stockholders' equity                               395,000

Current Liability

Accounts Payable                           28,000

Long-Term Liability

Notes Payable (Due in 2years)      40,000

Total Liabilities                                                              68,000  

Total Equity $ Liabilities                                             463,000  

Conclusion

As both the Total Assets and Total Equity and Liabilities are each equal to $463,000, it implies the financial statement is accurately prepared since both must always be equal.