Question

# The following income statement was prepared by an office clerk hired for July. As the accounting...

The following income statement was prepared by an office clerk hired for July. As the accounting supervisor, you recognize that it is incorrect and prepare a corrected multi-step income statement.

 Demo Sales Income Statement For Month Ended July 31, 2017 Sales \$ 562,740 Accounts receivable 37,300 Unearned sales 18,120 Net sales \$ 618,160 Operating expenses: Accumulated depreciation, equipment \$ 30,300 Advertising expense 14,120 Cost of goods sold 395,200 Depreciation expense, equipment 3,120 Insurance expense 2,560 Interest expense 1,820 Interest payable 280 Jen Conway, withdrawals 14,060 Office supplies 9,600 Prepaid insurance 15,200 Prepaid rent 25,300 Rent expense 5,360 Salaries payable 175,200 Sales discounts 2,920 695,040 Loss \$ 76,880

Solution:-

Income statement :-

 Demo Sales Income Statement For Month Ended July 31, 2017 Particulars Amount Amount Sales \$562,740 Sales discount \$2,920 Cost of goods sold \$395,200 Gross profit = 562,740 - 2,920 - 395,200 = \$164,620 Operating expenses : Selling & Administrative expenses : Advertisement expeses \$14,120 Depreciation expenses \$3,120 Insurance expenses \$2,560 Rent expenses \$5,360 Total operating expenses = \$14,120 + \$3,120 + \$2,560 + \$5,360 = \$25,160 Profit from operation = 164,620 - 25,160 = \$139,460 Other revenues and expenses : Interest expenses \$1,820 Net income = \$139,460 - 1,820 = \$ 137,640

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