E5-10 Prepare multiple-step and single-step income statement

In its income statement for the year ended December 31,2015, Lemere Company reported the following
condensed data.

Operating Expenses $725,000 Interest revenue

Cost of goods sold 1,289,000 Loss on disposal of plant assets
Interest expense 70,000 Net sales

Instructions:
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

(a) Multiple-step income statement

LEMERE COMPANY
Income Statement
For the Year ended December 31, 2015
Net sales Value
Cost of goods sold Value
Gross profit ?
Operating expenses Value
Income from operations ?
Other revenues and gains
Interest revenue Value
Other expenses and losses
Interest expense Value
Loss on disposal of plant assets Value ? ?
Net income ?

(b) Single-step income statement

LEMERE COMPANY
Income Statement
For the Year ended December 31, 2015
Revenues
Net Sales Value
Interest revenue Value
Total revenues ?
 Expenses
Cost of goods sold Value
Operating expenses Value
Interest expense Value
Loss on disposal of plant assets Value
Total expenses ?
Net income ?

After you have completed the requirements of E5-10, consider the additional question.

1. Suppose cost of goods sold changed to $1,320,000. What impact does this have on net income,
as determined using both the multiple-step and single-step income statements?
orted the following

$28,000
17,000
2,200,000

a in cells with a "?" .

ave on net income,
P5-1A Journalize purchase and sales transactions under a perpetual inventory system
Powell's Book Warehouse distributes hardcover books to retail stores and extend credit terms of 2/10, n/30 to all of
At the end of May, Powell's inventory consisted of books purchased for $1,800. During June, the following merchand
occurred.

June 1 Purchased books on account for $1,600 from Kline Publishers, FOB destination, terms 2/10, n/30.
The appropriate party also made a cash payment of $50 for the freight on this date.
3 Sold books on account to Reading Rainbow for $2,500. The cost of the books sold was $1,440.
6 Received $100 credit for books returned to Kline Publishers.
9 Paid Kline Publishers in full, less discount.
15 Received payment in full from Reading Rainbow.
17 Sold books on account to Blanco Books for $1,800. The cost of the books sold was $1,080.
20 Purchased books on account for $1,500 from Dietz Publishers, FOB destination, terms 2/15,n/30.
The appropriate party also made a cash payment of $50 for the freight on this date.
24 Received payment in full from Blanco Books.
26 Paid Dietz Publishers in full less discount.
28 Sold books on account to Reddy Bookstore for $1,400. The cost of the books sold was $850.
30 Granted Reddy Bookstore $120 credit for books returned costing $72.

Powell's Book Warehouse's chart of accounts includes the following: No.101 Cash, No.112, Accounts Receivable,
No.120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No.412 Sales Returns and Allowances, No. 414
Sales Discounts, and No. 595 Cost of Goods Sold.

Instructions
Journalize the transactions for the month of June for Powell's Book Warehouse using a perpetual inventory system.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

June 1 Account Value

Account Value

3 Account Value
Account Value
`

3 Account Value
Account Value

6 Account Value
Account Value
9 Account Value
Account Value
Account Value

15 Account Value
Account Value

17 Account Value
Account Value

17 Account Value
Account Value

20 Account Value
Account Value

24 Account Value
Account Value
Account Value

26 Account Value
Account Value
Account Value

28 Account Value
Account Value

28 Account Value
Account Value

30 Account Value
Account Value
 ' 30 Account Value
Account Value

After you have completed the requirements of P5-1A, consider these additional questions.

1. Suppose that the June 1 purchase changed to $2,500. Redo the journal entries
affected by this change.
2. Suppose that the sale on June 28 changed to $3,000 and the cost of sale changed to
$1,200. Redo the journal entries affected by these changes.
ms of 2/10, n/30 to all of its customers.
, the following merchandising transactions

rms 2/10, n/30.

was $1,440.

erms 2/15,n/30.

was $850.

Accounts Receivable,
and Allowances, No. 414

etual inventory system.

ells with a "?" .
P5-5A Complete accounting cycle beginning with a worksheet
The trial balance of Valdez Fashion Center contained the following account at November 30, the end of the company

VALDEZ FASHION CENTER

Trial Balance
November 30, 2015
Debit Credit
Cash $ 8,700
Accounts Receivable 30,700
Inventory 44,700
Supplies 6,200
Equipment 133,000
Accumulated Depreciation - Equipment $ 28,000
Notes Payable 51,000
Accounts Payable 48,500
Common Stock 50,000
Retained Earnings 40,000
Dividends 12,000
Sales Revenue 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400
Salaries and Wages Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals 972,700 972,700

Adjustment Data:
1. Supplies on hand totaled $2,000.
2. Depreciation is $11,500 on the equipment.
3. Interest of $4,000 is accrued on notes payable at November 30.
4. Inventory actually on hand is $44,400.

Instructions
(a) Enter the trial balance on a worksheet, and complete the worksheet.
(b) Prepare a multiple-step income statement and a retained earnings statement for the year, and
a classified balance sheet as of November 30, 2015. Notes payable of $20,000 are due in January 201
(c ) Journalize the adjusting entries.
(d) Journalize the closing entries.
(e ) Prepare a post-closing trial balance.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?"
(a) VALDEZ FASHION CENTER
Worksheet
For the Year Ended November 30, 2015

Account Titles Trial Balance Adjustments

Dr. Cr. Dr.

Cash $ 8,700
Accounts Receivable 30,700
Inventory 44,700 (d)
Supplies 6,200 (a)
Equipment 133,000
Accumulated Depreciation - Equipment 28,000 (b)
Notes Payable 51,000
Accounts Payable 48,500
Common Stock 50,000
Retained Earnings 40,000
Dividends 12,000
Sales Revenue 755,200
Sales Returns and Allowances 8,800
Cost of Goods Sold 497,400 (d) Value
Salaries and Wages Expense 140,000
Advertising Expense 24,400
Utilities Expense 14,000
Maintenance and Repairs Expense 12,100
Freight-Out 16,700
Rent Expense 24,000
Totals 972,700 972,700

Supplies Expense (a) Value

Depreciation Expense (b) Value
Interest Expense ( c) Value
Interest Payable ( c)
Totals
Net Loss
Totals

(b) VALDEZ FASHION CENTER

Income Statement
 For the Year Ended November 30, 2015
Sales Revenue
Sales revenue Value
Less: Sales returns and allowances Value
Net sales ?
Cost of goods sold Value
Gross profit ?
Operating expenses
Salaries and wages expense Value
Advertising expense Value
Rent expense Value
Freight-out Value
Utilities expense Value
Maintenance and repair expense Value
Depreciation expense Value
Supplies expense Value
Total operating expenses ?
Income from operations ?
Other expenses and losses
Interest expense Value
Net loss ?

VALDEZ FASHION CENTER

Retained Earnings Statement
For the Year Ended November 30, 2015
Retained Earnings, December 1, 2014 Value
Less: Net loss Value
Dividends Value ?
Retained Earnings, November 30, 2015 ?

VALDEZ FASHION CENTER

Balance Sheet
November 30, 2015
Assets
Current assets
Cash Value
Accounts Receivable Value
Inventory Value
Supplies Value
 Total current assets ?
Property, plant and equipment
Equipment Value
Accumulated depreciation - Value ?
equipment
Total assets ?

Liabilities and Stockholder's Equity

Current liabilities
Notes payable (due next year) Value
Account payable Value
Interest payable Value
Total current liabilities ?
Long-term liabilities
Notes payable Value
Total liabilities ?
Stockholder's equity
Common stock Value
Retained earnings Value Value
Total liabilities and stockholder's equity ?

(c ) Adjusting entries:

Nov. 30 Account Value

Account Value

Nov. 30 Account Value

Account Value

Nov. 30 Account Value

Account Value

Nov. 30 Account Value

Account Value

(d) Closing entries:

Nov. 30 Account Value

Account Value
 Nov. 30 Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value
Account Value

Nov. 30 Account Value

Account Value

Nov. 30 Account Value

Account Value

(e ) VALDEZ FASHION CENTER

Post-closing Trial Balance
November 30, 2015
Debit Credit
Cash Value
Accounts Receivable Value
Inventory Value
Supplies Value
Equipment Value
Less: Accumulated Depreciation - Equipment Value
Notes Payable Value
Accounts Payable Value
Interest Payable Value
Common Stock
Retained Earnings Value
? ?

After you have completed the requirements of P5-5A, consider the additional question.

1. Suppose that supplies on hand and Interest accrued changed to $3,000 and $4,600
respectively. How do these changes affect the financial statements?
e end of the company's fiscal year.

r the year, and

are due in January 2016.

ula in cells with a "?" .

HION CENTER
sheet
November 30, 2015
Adjusted Income
Adjustments Trial Balance Statement Balance Sheet
Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Value Value
Value Value
? ? Value
? ? Value
Value Value
Value ? Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value
Value Value

Value
Value
Value
Value Value Value

? Value
? ? ? ?
P5-1B Journalize purchase and sales transactions under a perpetual inventory system
Urdan Co. distributes suitcases to retail stores and extends credit terms of 1/10, n/30 to all of its customers.
At the end of June, Urdan's inventory consisted of suitcases costing $1,200. During the month of July,
the following merchandising transactions occurred.
July 1 Purchased suitcases on account for $1,800 from Hostad Manufacturers, FOB destination,
terms 2/10, n/30. The appropriate party also made a cash payment of $100 for freight
on this date.
3 Sold suitcases on account to Kaye Satchels for $2,000. The cost of suitcases sold is $1,200.
9 Paid Hostad Manufacturers in full.
12 Received payment in full from Kaye Satchels.
17 Sold suitcases on account to The Going Concern for $1,800. the cost of the suitcases sold
was $1,080.
18 Purchased suitcases on account for $1,900 from Nelson Manufacturers, FOB shipping point,
terms 1/10,n/30. The appropriate party also made a cash payment of $125 for freight
on this date.
20 Received $300 credit (including freight) for suitcases returned to Nelson Manufacturers.
21 Received payment in full from The Going Concern.
22 Sold suitcases on account to Wopat's for $2,250. the cost of suitcases sold was $1,350.
30 Paid Nelson Manufacturers in full.
31 Granted Wopat's $200 credit for suitcases returned costing $120.

Urdan's chart of accounts includes the following: No.101 Cash, No.112 Accounts Receivable,
No.120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No.412 Sales Returns and Allowances, No. 414
Sales Discounts, and No. 595 Cost of Goods Sold.

Instructions
Journalize the transactions for the month of July for Urdan using a perpetual inventory system.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

July 1 Account Value

Account Value

3 Account Value
Account Value
`

3 Account Value
Account Value
9 Account Value
Account Value
Account Value

12 Account Value
Account Value
Account Value

17 Account Value
Account Value

17 Account Value
Account Value

18 Account Value
Account Value

18 Account Value
Account Value

20 Account Value
Account Value

21 Account Value
Account Value
Account Value
`

22 Account Value
Account Value

22 Account Value
Account Value
 30 Account Value
Account Value

31 Account Value
Account Value

31 Account Value
Account Value

After you have completed the requirements of P5-1B, consider these additional questions.

1. Suppose that the July 3 sale and cost of sale changed to $2,800 and $1,500 respectively.
Redo journal entries affected by these changes.
2. Suppose that the purchase on July 18 changed to $2,600. Redo the journal entries affected by these chan
f its customers.

nd Allowances, No. 414

affected by these changes.