Preparing a Multiple‐Step Income Statement Purpose of Assignment The purpose of this assignment is to help you become familiar with the parts of the multiple‐step income statement. Assignment Steps Resources: Financial Accounting: Tools for Business Decision Making Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years. SIMON COMPANY Income Statement For the Year Ended December 31, 2017 Revenues Net sales $850,000 Other revenues 22,000 872,000 Cost of goods sold 555,000 Gross profit 317,000 Operating expenses Selling expenses 109,000 Administrative expenses 103,000 212,000 Net earnings $105,000 As an experienced, knowledgeable accountant, you review the statement and determine the following facts: Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. Other revenues consist of sales discounts $18,000 and rent revenue $4,000. Selling expenses consist of salespersons’ salaries $80,000, depreciation on equipment $10,000, advertising $13,000, and sales commissions $6,000. The commissions represent commissions paid. At December 21, $3,000 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense. Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018. Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate. Show your work on the Excel® spreadsheet and submit with your explanation.

    SIMON’S COMPANY INCOME STATEMENT

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    There are span deep kinds of fullowance propositions that are uniformly used and these involve; Multi-tread fullowance proposition and solitary tread fullowance proposition. With Multi-tread fullowance proposition, there is aggravate than individual incorporation to land at the cajole fullowance which includes aggravate referpowerful attributpowerful attributableice than a solitary tread fullowance proposition, the most telling individual life the vicious gain as courteous as the performance gain.  This kind of proposition is divided into span deep individualitys that involve the unreserved individuality as courteous as the non-unreserved member (accountingexplained.com). In this view, the unreserved individuality entails referpowerful attributpowerful attributableice viewing revenues as courteous as expenses among the cause activities of the affair. Except viewing the vicious gain and the unreserved gain postulates is conducive in the individuality of performance ce the multi-tread fullowance proposition. However, full unreserved revenues are then regrouped at the summit of the fullowance stamen, span the unreserved expenses are grouped into subclasses of consume of commodities sold, expenses compromised in selling as courteous as functional expenses.

    Furthermore, selling expenditures refers to those that are spending instantly on making ales. Ce point there are examples of selling expenses that involve; sales commissions, sales salaries, expenses compromised in advertisement, expenses compromised in endowment of services and other products and lastly deterioration expenses ce equipments. On the other artisan, the functional expenses are akin to open functional activities such as deterioration expenses on the construction employment, employment salaries, and supply to the employment expenses as courteous as expenses ce employment utilities (accountingexplained.com). Besides, the non-unreserved individualitys of multiple tread fullowance proposition is so unconcealed as other fullowance and expenses which entails the revenues and those that are referpowerful attributpowerful attributpowerful attributpowerful eared instantly through the deep activities of the affair except are considered controltuitous to the affair such as when the affair incurs missinges, gains of sale of any absorbed bombardment or urban propertys and curiosity-behalf expenses. The non-unreserved individuality so entails unwonted aces of revenues as courteous as expenses that are referpowerful attributpowerful attributpowerful attributpowerful many and referpowerful attributpowerful attributpowerful attributpowerful customary love missing resulting from regular visitation.

    Furthermore, this kind if fullowance proposition is unconcealed  to entertain the subjoined utilitys aggravate solitary tread fullowance proposition and these involve;  it fit controlethought of vicious gain whereby the vicious gain has to be equiponderant to sales ce the absorbed end minus the consume of the commodities sold. By using this kind of proposition, individual is powerful to discern how considertelling the concourse is generating on its sales antecedently the inducement of the unreserved fullowance (Kokemullar,  n.d). By life powerful to discern the vicious gain, it’s likely to indicate vicious room by dividing sales by vicious gain which helps to supply inferential referpowerful attributpowerful attributableice used to parallel the prevalent and antecedent vicious room and the perseverance stands to prove how able the affair is making gain on its sales.

    The other utility as to why multi-tread fullowance proposition is serviceable is that is separates twain the unreserved and non-unreserved fullowances which fit contentment of analyzing how considertelling the cajole fullowance ce the absorbed end that is superficial from the commonplace affair activities, gone with solitary tread fullowance proposition, there is no possibility of having inferential breakdown in complete area which against able decomposition of fullowance. However, resisting the occurrence that this kind of proposition is aggravate serviceable and inferential ce the concourse to push quenched its financial decomposition ablely, multi-tread fullowance propositions entertain the subjoined setbacks; span ce provision whereby from accounting inducements, this kind of propositions considertelling span in provision paralleld to solitary tread fullowance proposition chiefly among complete state gone it entails fullowance disunion(Hanks, n.d);  besides, gone the proposition include a inferential schedule of diversified sources of revenues as courteous as expenses and this implies that aggravate span is required to fit the decomposition of financial postulates and its incorporation to the proposition.

    Lastly, multi tread fullowance stamen entails some levels of indistinctness imputable to the occurrence that the proposition entails though inferential except prolix postulates which agency transfer to indistinctness in its definition. Again some magnitude of the proposition are unconducive to property an able follow-up imputable to the habit each ace answer and is conducive. However, resisting the occurrence that the proposition has a hanker schedule of aces that agency transfer to indistinctness, multi-tread fullowance proposition is the most widely used gone it supplys inferential and open referpowerful attributpowerful attributableice on how a absorbed concourse generates gain from its sales and gone complete ace is scheduleed, it’s likely to decomposition and prove the property of each ace on the gainability of the concourse.

    References

    Hanks, G. (n.d). Multi-Tread Fullowance Proposition Vs. Solitary-Tread Proposition

    Kokemullar, N.  (n.d). Utilitys & Disadvantages of Multi-Tread Fullowance Proposition

    http://accountingexplained.com/financial/statements/multi-step-income-statement