Question

The following selected accounts from the Pina Colada Corp.’s general ledger are presented below for the year ended December 31, 2017: Advertising expense $ 52,800 Interest revenue $ 28,800 Common stock 240,000 Inventory 64,320 Cost of goods sold 1,041,600 Rent revenue 23,040 Depreciation expense 120,000 Retained earnings 513,600 Dividends 144,000 Salaries and wages expense 648,000 Freight-out 24,000 Sales discounts 8,160 Income tax expense 67,200 Sales returns and allowances 39,360 Insurance expense 14,400 Sales revenue 2,304,000 Interest expense 67,200 Prepare a multiple-step income statement.

Answer 1

Answer:

Pina Colada Corp.

Multi-step Income Statement for the year ended December 31, 2017:

Sales revenue                                   $2,304,000

Sales returns and allowances                 39,360

Net Sales                                            2,264,640

Cost of goods sold                              1,041,600

Gross profit                                         1,223,040

Rent revenue                                          23,040

Gross operating revenue                  1,246,080

Depreciation expense             120,000

Salaries and wages expense 648,000

Freight-out                                24,000

Advertising expense                52,800

Sales discounts                           8,160

Insurance expense                   14,400

Total operating expenses                   867,360

Operating income (EBIT)                   $378,720

Interest revenue                                   28,800  

Interest expense                                 (67,200)

Income before taxes                       $340,320

Income tax expense                            67,200

Net income                                       $273,120

Retained earnings                             513,600

Dividends                                          (144,000)

Retained earnings, Dec. 31, 2017  $642,720

Explanation:

a) Data and Calculations:

December 31, 2017:

Common stock 240,000

Retained earnings 513,600

Inventory 64,320

Sales revenue 2,304,000

Sales returns and allowances 39,360

Rent revenue 23,040

Interest revenue  28,800  

Cost of goods sold 1,041,600

Depreciation expense 120,000

Salaries and wages expense 648,000

Freight-out 24,000

Advertising expense  52,800

Sales discounts 8,160

Insurance expense 14,400

Interest expense 67,200

Income tax expense 67,200

Dividends 144,000