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

As an experienced, knowledgeable accountant, you review the statement and determine the following facts:
1. Net sales consist of sales $900,000, less delivery expense on merchandise sold $30,000, and sales returns and allowances $30,000.
2. Other revenues consist of sales discounts $16,000 and rent revenue $8,000.
3. Selling expenses consist of salespersons’ salaries $80,000; depreciation on accounting equipment $8,000; advertising $10,000; and sales commissions $6,000. The commissions represent commissions paid. At December 31, $4,000 of commissions have been earned by salespersons but have not been paid.
4. Administrative expenses consist of office salaries $37,000; dividends $14,000; utilities $12,000; interest expense $2,000; and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2002.

Instructions Prepare a correct detailed multiple-step income statement.

Transcribed Image Text:

HORIZON COMPANY Income Statement For the Year Ended December 31, 2001 Revenues Net sales $840,000 Other revenues 24,000 864,000 Cost of goods sold 555,000 Gross profit 309,000 Operating expenses Selling expenses 104,000 Administrative expenses 89,000 193,000 Net earnings $116,000