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$8$:

Line Item Description Amount

Cash $$208,750$

Accounts Receivable $375,000$

Inventory $945,000$

Estimated Returns Inventory $87,500$

Office Supplies $37,500$

Prepaid Insurance $30,000$

Office Equipment $288,000$

Accumulated Depreciation$$ Office Equipment $123,750$

Store Equipment $1,278,750$

Accumulated Depreciation$$ Store Equipment $466,750$

Accounts Payable $72,900$

Customer Refunds Payable $87,500$

Estimated Coupons Payable $48,600$

Salaries Payable $24,000$

Note Payable $($due evenly over next five years$)130,000$

Common Stock $37,500$

Retained Earnings $($as of Sept. $30,20$Y$7)634,500$

Dividends $312,500$

Sales $8,917,500$

Cost of Goods Sold $5,437,500$

Sales Salaries Expense $972,000$

Advertising Expense $114,750$

Depreciation Expense$$ Store Equipment $20,750$

Miscellaneous Selling Expense $5,000$

Office Salaries Expense $193,500$

Rent Expense $99,750$

Insurance Expense $57,375$

Depreciation Expense$$ Office Equipment $40,500$

Office Supplies Expense $4,125$

Miscellaneous Administrative $4,750$

Interest Expense $30,000$

Instructions:

Question Content Area

$1.$ Prepare a multiple$-$step income statement. Enter account decreases and outflows as negative amounts.

Prescott Inc.

Income Statement

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

Line Item Description Amount Amount Amount

Sales

$Sales

$8,917,500$

Cost of goods sold

Cost of goods sold

$5,437,500$

Gross profit

$Gross profit

$3,480,000$

Operating expenses:

Selling expenses:

Sales salaries expense

$Sales salaries expense

$972,000$

Advertising expense

Advertising expense

$114,750$

Depreciation expense$-$store equipment

Depreciation expense$-$store equipment

$20,750$

Miscellaneous selling expense

Miscellaneous selling expense

$5,000$

Total selling expenses $Total selling expenses

$1,112,500$

Administrative expenses:

Office salaries expense

$Office salaries expense

$193,500$

Rent expense

Rent expense

$99,750$

Insurance expense

Insurance expense

$57,375$

Depreciation expense$-$office equipment

Depreciation expense$-$office equipment

$40,500$

Office supplies expense

Office supplies expense

$4,125$

Miscellaneous administrative expense

Miscellaneous administrative expense

$4,750$

Total administrative expenses Total administrative expenses

$400,000$

Total operating expenses Total operating expenses

$1,512,500$

Operating income

$Operating income

$1,967,500$

Other expense:

Interest expense

Interest expense

$30,000$

Net income

$Net income

$1,937,500$

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$8$

Line Item Description Common

Stock Retained

Earnings

Total

$$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

$$-$ Select $-$

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 $$26,000.$ Enter account decreases and outflows as negative amounts.

Prescott Inc.

Balance Sheet

September $30,20$Y$8$

Line Item Description Amount Amount Amount

Assets

Current assets:

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Total current assets $Total current assets

Property, plant, and equipment:

$$-$ Select $-$

$-$ Select $-$

Subtotal $Subtotal

$$-$ Select $-$

$-$ Select $-$

Subtotal Subtotal

Total property, plant, and equipment Total property, plant, and equipment

Total assets $Total assets

Liabilities

Current liabilities:

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Total current liabilities $Total current liabilities

Long$-$term liabilities:

$-$ Select $-$

Total liabilities $Total liabilities

Stockholders' Equity

$$-$ Select $-$

$-$ Select $-$

Total stockholders' equity Total stockholders' equity

Total liabilities and stockholders' equity $Total liabilities and stockholders' equity