Multiple$-$Step Income Statement and Report Form of Balance Sheet

The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September $30,20$Y$8$:

Cash $$146,125$ Retained Earnings $($as of Sept. $30,20$Y$7)$ $ $444,150$

Accounts Receivable $262,500$ Dividends $218,750$

Inventory $661,500$ Sales $6,242,250$

Estimated Returns Inventory $61,250$ Cost of Goods Sold $3,806,250$

Office Supplies $26,250$ Sales Salaries Expense $680,400$

Prepaid Insurance $21,000$ Advertising Expense $80,325$

Office Equipment $201,600$ Depreciation Expense$$ Store Equipment $14,525$

Accumulated Depreciation$$ Office Equipment $86,625$ Miscellaneous Selling Expense $3,500$

Store Equipment $895,125$ Office Salaries Expense $135,450$

Accumulated Depreciation$$ Store Equipment $326,725$ Rent Expense $69,825$

Accounts Payable $85,050$ Insurance Expense $40,163$

Customer Refunds Payable $61,250$ Depreciation Expense$$ Office Equipment $28,350$

Salaries Payable $16,800$ Office Supplies Expense $2,887$

Note Payable $($due evenly over next $5$ years$)91,000$ Miscellaneous Administrative $3,325$

Common Stock $26,250$ Interest Expense $21,000$

Instructions:

Question Content Area

$1.$ Prepare a multiple$-$step income statement.

Prescott Inc.

Income Statement

For the Year Ended September $30,20$Y$8$

Sales

$Sales

$6,242,250$

Cost of goods sold

Cost of goods sold

$3,806,250$

Gross profit

$Gross profit

$2,436,000$

Operating expenses:

Selling expenses:

Sales salaries expense

$Sales salaries expense

$680,400$

Advertising expense

Advertising expense

$80,325$

Depreciation expense$-$store equipment

Depreciation expense$-$store equipment

$14,525$

Miscellaneous selling expense

Miscellaneous selling expense

$3,500$

Total selling expenses $fill in the blank $337004$f$79$fc$7$fd$7\_15$

$778,750$

Administrative expenses:

Office salaries expense

$Office salaries expense

$135,450$

Rent expense

Rent expense

$69,825$

Insurance expense

Insurance expense

$40,163$

Depreciation expense$-$office equipment

Depreciation expense$-$office equipment

$28,350$

Office supplies expense

Office supplies expense

$2,887$

Miscellaneous administrative expense

Miscellaneous administrative expense

$3,325$

Total administrative expenses fill in the blank $337004$f$79$fc$7$fd$7\_28$

$280,000$

Total operating expenses fill in the blank $337004$f$79$fc$7$fd$7\_29$

$1,058,750$

Operating income

$Operating income

$1,377,250$

Other expense:

Interest expense

Interest expense

$21,000$

Net income

$Net income

$1,356,250$

Feedback Area

Feedback

Use the multiple$-$step income statement format, with its separation of revenues, cost of merchandise sold, selling expenses, administrative expenses, and other income and other expense.

Question Content Area

$2.$ Prepare a statement of stockholders' equity. No common stock was issued during the year. For those boxes in which no entry is required, leave the box blank.

Prescott Inc.

Statement of Stockholders$$ Equity

For the Year Ended September $30,20$Y$8$

blank Common Stock Retained Earnings Total

Balances, Oct. $1,20$Y$7$

$Balances, Oct. $1,20$Y$7$

$26,250$

Balances, Oct. $1,20$Y$7$

$444,150$

$Balances, Oct. $1,20$Y$7$

$470,400$

Net income

Net income

$0$

Net income

$1,356,250$

Net income

$1,356,250$

Dividends

Dividends

$0$

Dividends

$-218,750$

Dividends

$-218,750$

Balances, Sept. $30,20$Y$8$

$Balances, Sept. $30,20$Y$8$

$26,250$

$Balances, Sept. $30,20$Y$8$

$1,581,650$

$Balances, Sept. $30,20$Y$8$

$1,607,900$

Feedback Area

Feedback

Recall that stockholders$$ equity increases with additional stock issues and increases in retained earnings through net income and gains. Stockholders$$ equity decreases when dividends are declared and paid and when retained earnings decrease through net losses.

Question Content Area

$3.$ Prepare a report form of balance sheet, assuming that the current portion of the note payable is $$18,200.$

Prescott Inc.

Balance Sheet

September $30,20$Y$8$

Assets

Current assets:

Cash

$Cash

$146,125$

Accounts receivable

Accounts receivable

$262,500$

Inventory

Inventory

$661,500$

Estimated returns inventory

blank Estimated returns inventory

$61,250$

blank

Office supplies

Office supplies

$26,250$

Prepaid insurance

Prepaid insurance

$21,000$

Total current assets $fill in the blank $335$adf$0$d$2010$fde$\_13$

$1,178,625$

Property, plant, and equipment:

Office equipment

$Office equipment

$201,600$

Less accumulated depreciation

Less accumulated depreciation

$86,625$

$Less accumulated depreciation

$114,975$

Store equipment

$Store equipment

$895,125$

Less accumulated depreciation

Less accumulated depreciation

$326,725$

Less accumulated depreciation

$568,400$

Total property, plant, and equipment fill in the blank $335$adf$0$d$2010$fde$\_24$

$683,375$

Total assets $fill in the blank $335$adf$0$d$2010$fde$\_25$

$1,862,000$

Liabilities

Current liabilities:

Accounts