Question

The following balances were taken from the books of Vaughn Corp. on December 31, 2020. Interest...

The following balances were taken from the books of Vaughn Corp. on December 31, 2020.

Interest revenue

$87,700

Accumulated depreciation—equipment

$41,700

Cash

52,700

Accumulated depreciation—buildings

29,700

Sales revenue

1,381,700

Notes receivable

156,700

Accounts receivable

151,700

Selling expenses

195,700

Prepaid insurance

21,700

Accounts payable

171,700

Sales returns and allowances

151,700

Bonds payable

101,700

Allowance for doubtful accounts

8,700

Administrative and general expenses

98,700

Sales discounts

46,700

Accrued liabilities

33,700

Land

101,700

Interest expense

61,700

Equipment

201,700

Notes payable

101,700

Buildings

141,700

Loss from earthquake damage

151,700

Cost of goods sold

622,700

Common stock

501,700

Retained earnings

22,700


Assume the total effective tax rate on all items is 20%.

Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.

Homework Answers

Answer #1
  • Preparation of a multiple-step income statement

Amount $

Amount $

Sales revenue

1,381,700

Less: Sales return and allowance

-151,700

Less: Sales discount

-46,700

198,400

Net Sales

1,183,300

Less: Cost of goods sold

-622,700

Gross profit

560,600

Operating expense

Less: Administrative and general expense

-98,700

Less: Selling expense

-195,700

Total operating expense

-294,400

Operating income

266,200

Other income

Interest revenue

87,700

Other expense

Interest expense

61,700

Loss from earthquake

151,700

-125,700

Income before tax

140,500

Less; Income tax @20%

-28,100

Net income

112,400

Share outstanding

100,000

EPS

1.124

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