An inexperienced accountant prepared this condensed income statement for Sundberg Company, a retail firm that has been in business for a number of years.

SUNDBERG COMPANY

Income Statement

For the Year Ended December 31, 2014

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.

1. Net sales consist of sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000.

2. Other revenues consist of sales discounts $18,000 and rent revenue $4,000.

3. 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 31, $3,000 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense.

4. 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 2015.

Instructions

Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate.