FULL IMAGE HERE httpsiimgurcomlL8YDLKpng Problem 55A An inex

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*Problem 5-5A An inexperienced accountant prepared this condensed income statement for Blossom Company, a retail firm that has been in business for a number of years BLOSSOM COMPANY Income Statement For the Year Ended December 31, 2017 Revenues $867,000 22,440 889,440 566,100 323,340 Net sales Other revenues Cost of goods sold Gross profit Operating expenses 111,180 105,060 216,240 $107,100 Selling expenses Administrative expenses Net earnings As an experienced, knowledgeable accountant, you review the statement and determine the following facts 1. Net sales consist of sales $929,220, less freight-out on merchandise sold $33,660, and sales returns and allowances $28,560 2. Other revenues consist of sales discounts $18,360 and rent revenue $4,080 3. Selling expenses consist of salespersons\' salaries $81,600; depreciation on equipment $10,200; advertising $13,260; and sales commissions $6,120. The commissions represent commissions paid. At December 31, $3,060 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 $47,940; dividends $18,360; utilities $12,240; interest expense $2,040; and rent expense $24,480, which includes prepayments totaling $6,120 for the first quarter of 2018 4. Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate. (List other revenues before other expenses. Round answers to 0 decimal places, e.g. 5,125.) BLOSSOM COMPANY Income Statement Question Attempts: 0 of 3 used 2018 by John Wiley All rights

Solution

BLOSSOM Company Income Statement Particulars Amount Amount Revenue Sales 929220 Less Freight out on Merchandise 33660 Sales returns and allowances 28560 62220 Net Sales 867000 Less Sales Discounts 18360 Net Sales 848640 Other Revenue Rent Revenue 4080 Total 852720 Less Expenses Cost of Goods Sold 566100 Gross Profit 286620 Less Operating Expenses Salaries and Wage Expense 132600 Advertising Expenses 13260 Depreciation 10200 Sales Commission 3060 Utilities 12240 Rent Expense 18360 Total Expenses 189720 EBIT 96900 Less Interest 2040 EBT 94860 Less Taxes @25% 23715 EAT 71145 Less Dividend Paid 18360 Net Income 52785