The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019:

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2019:

Cash $  240,000 Kristina Marble, Drawing $ 100,000 Accounts Receivable 966,000 Sales 11,343,000 Merchandise Inventory 1,690,000 Cost of Merchandise Sold 7,850,000 Estimated Returns Inventory 22,500 Sales Salaries Expense 916,000 Office Supplies 13,500 Advertising Expense 550,000 Prepaid Insurance 8,000 Depreciation Expense — Office Equipment 830,000 Store Equipment 140,000 Accumulated Depreciation— Miscellaneous Selling Expense 38,000 Office Equipment 550,000 Office Salaries Expense 650,000 Store Equipment 3,600,000 Rent Expense 94,000 Accumulated Depreciation — Depreciation Expense — Store Equipment 1,820,000 Office Equipment 50,000 Accounts Payable 326,000 Insurance Expense 48,000 Customer Refunds Payable 40,000 Office Supplies Expense 28,100 Salaries Payable 41,500 Miscellaneous Administrative Exp. 14,500 Note PayableInterest Expense 21,000 (final payment due 2022) 300,000 Kristina Marble, Capital 3,449,100

Instructions

1. Prepare a multiple-step income statement.

2. Prepare a statement of owner’s equity.

3. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000.

4. Briefly explain how multiple-step and single-step income statements differ.

Answer:

1.

Sales$11,343,000

Cost of merchandise sold7,850,000

Gross profit$ 3,493,000

Expenses:

Selling expenses:

Sales salaries expense $916,000

Advertising expense 550,000

Depreciation expense—store 

equipment140,000

Miscellaneous selling expense 38,000

Total selling expenses $1,644,000

Administrative expenses:

Office salaries expense $650,000

Rent expense94,000

Depreciation expense—office 

equipment50,000

Insurance expense 48,000

Office supplies expense 28,100

Miscellaneous administrative

expense14,500

Total administrative expenses 884,600

Total operating expenses2,528,600

Income from operations$ 964,400

Other expense:

Interest expense21,000

Net income$ 943,400

2.

Kristina Marble, capital, June 1, 2018$3,449,100

Net income for the year$ 943,400

Withdrawals(100,000)

Increase in owner’s equity843,400

Kristina Marble, capital, May 31, 2019$4,292,500

3.

Current assets:

Cash$ 240,000

Accounts receivable966,000

Merchandise inventory1,690,000

Estimated returns inventory22,500

Office supplies13,500

Prepaid insurance8,000

Total current assets$2,940,000

Property, plant, and equipment:

Office equipment $ 830,000

Less accumulated depreciation 550,000 $ 280,000

Store equipment $3,600,000

Less accumulated depreciation 1,820,000 1,780,000

Total property, plant, and equipment2,060,000

Total assets$5,000,000

Current liabilities:

Accounts payable$ 326,000

Customer refunds payable40,000

Salaries payable41,500

Note payable (current portion)50,000

Total current liabilities$ 457,500

Long-term liabilities:

Note payable (final payment due 2022)250,000

Total liabilities$ 707,500

Kristina Marble, capital4,292,500

Total liabilities and owner’s equity$5,000,000

4. The multiple-step form of income statement contains various sections for

revenues and expenses, with intermediate balances, and concludes with 

net income. In the single-step form, the total of all expenses is deducted 

from the total of all revenues. There are no intermediate balances.