Question

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 2018:

Cash	$129,100		Retained Earnings	569,100
Accounts Receivable	344,300		Dividends	77,300
Inventory	392,500		Sales	$4,729,600
Estimated Returns Inventory	22,500		Cost of Goods Sold	2,735,700
Office Supplies	12,200		Sales Salaries Expense	769,300
Prepaid Insurance	9,400		Advertising Expense	211,600
Office Equipment	284,200		Depreciation Expense—    Store Equipment	41,200
Accumulated Depreciation—    Office Equipment	193,100		Miscellaneous Selling Expense	18,100
Store Equipment	887,000		Office Salaries Expense	420,000
Accumulated Depreciation—    Store Equipment	284,200		Rent Expense	62,000
Accounts Payable	196,600		Depreciation Expense—    Office Equipment	31,000
Customer Refunds Payable	40,000		Insurance Expense	19,200
Salaries Payable	12,600		Office Supplies Expense	11,400
Note Payable    (final payment due 2024)	412,500		Miscellaneous Administrative Exp.	8,200
Common Stock	61,100		Interest Expense	12,600

Required:

1. Prepare a multiple-step income statement.

Clairemont Co. Income Statement For the Year Ended May 31, 2018
Sales
Cost of goods sold
Gross profit
Expenses:
Selling expenses:
Sales salaries expense
Advertising expense
Depreciation expense-store equipment
Miscellaneous selling expense
Total selling expenses
Administrative expenses:
Office salaries expense
Rent expense
Insurance expense
Depreciation expense-office equipment
Office supplies expense
Miscellaneous administrative expense
Total administrative expenses
Total operating expenses
Income from operations
Other expense:
Interest expense
Net income

2. Prepare a retained earnings statement.

Clairemont Co. Retained Earnings Statement For the Year Ended May 31, 2018
Retained earnings, June 1, 2017
Net income for the year
Less dividends
Increase in retained earnings
Retained earnings, May 31, 2018

3. Prepare a balance sheet, assuming that the current portion of the note payable is $20,625.

Clairemont Co. Balance Sheet May 31, 2018
Assets
Current assets:
Cash
Accounts receivable
Inventory
Estimated returns inventory
Office supplies
Prepaid insurance
Total current assets
Property, plant and equipment:
Office equipment
Less: Accumulated depreciation
Store equipment
Less: Accumulated depreciation
Total property, plant and equipment
Total assets
Liabilities
Current liabilities:
Accounts payable
Salaries payable
Customer refunds payable
Note payable (current portion)
Total current liabilities
Long-term liabilities:
Note payable (final payment due 2024)
Total liabilities
Stockholders' equity
Common stock
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity

4. a. Which type of income statement shows intermediate balances?

Answer 1

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