Purpose of Assignment
The purpose of this assignment is to help you become familiar with the parts of the multiple ?step
income statement. Assignment Steps Resources: Financial Accounting: Tools for Business Decision Making Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company,
a retail firm that has been in business for a number of years. SIMON COMPANY Income Statement
For the Year Ended December 31, 2017 Revenues Net sales
Other revenues $850,000
872,000 Cost of goods sold 555,000 Gross profit 317,000 Operating expenses
Selling expenses 109,000 Administrative expenses 103,000
Net earnings $105,000 As an experienced, knowledgeable accountant, you review the statement and determine the following
1.Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns
and allowances $28,000.
2.Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
3.Selling expenses consist of salespersons’ salaries $80,000, depreciation on equipment $10,000,
advertsing $13,000, and sales commissions $6,000. The commissions represent commissions paid. At
December 21, $3,000 of commissions have been earned by salespersons but have not been paid. All
compensaton should be recorded as Salaries and Wages Expense.
4.Administratve expenses consist of office salaries $47,000, dividends $18,000, utlites $12,000, interest
expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first
quarter of 2018.
Assume a 25% tax rate.