Please Use Attached File Purpose Of Assignment

Please Use Attached Filepurpose Of Assignmentthe Purp

Purpose of Assignment The purpose of this assignment is to help you become familiar with the parts of the multipleâ€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 $850,000 Other revenues 22,,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 facts: Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. Other revenues consist of sales discounts $18,000 and rent revenue $4,000. Selling expenses consist of salespersons' salaries $80,000, depreciation on equipment $10,000, advertising $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 compensation should be recorded as Salaries and Wages Expense. Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018. Prepare a detailed multi-step income statement assuming a 25% tax rate. Write a brief explanation of 200 to 350 words on how the experienced accountant was able to determine the facts noted in the instructions. This explanation should be included on the Excel Worksheet provided in correct sentence structure. Show your work on the Excel ® spreadsheet and submit with your explanation.

Paper For Above instruction

The process of analyzing financial statements, especially income statements, involves a thorough understanding of accounting principles and the ability to interpret financial data accurately. In this scenario, an inexperienced accountant prepared a condensed income statement for Simon Company, which required an experienced accountant to review and adjust the figures to accurately reflect the company's financial position. The experienced accountant utilized several analytical skills and accounting knowledge to deduce the correct figures from the given data.

Firstly, the accountant analyzed the net sales figure, which initially appeared inconsistent. The reported net sales of $850,000 needed to be broken down. Recognizing that net sales are derived from gross sales minus sales returns, allowances, and discounts, the accountant identified that gross sales were higher than reported. The difference between gross sales of $911,000 and net sales of $850,000 indicates that sales returns and allowances ($28,000) and sales discounts ($18,000) were subtracted to arrive at net sales. The freight-out cost of $33,000 was correctly excluded from net sales because it is a selling expense rather than part of sales revenue.

Secondly, the accountant scrutinized other revenues, which included sales discounts and rent revenue. Identifying that sales discounts are contra-revenue accounts, the accountant properly classified them under 'Other revenues,' reflecting a deduction from gross sales. Rent revenue was classified straightforwardly.

Thirdly, the detailed breakdown of operating expenses was essential. The accountant identified that all component expenses, such as salaries, depreciation, advertising, and commissions, needed to be properly classified. For instance, commissions earned but not paid ($3,000) should be accrued and incorporated into sales commissions expense. The accountant combined sales commissions paid and accrued to reflect the total sales commission expense for the period.

Furthermore, expenses such as rent paid in advance ($6,000) for the upcoming period were correctly treated as prepaid expenses, thus not impacting this year's expense directly. The accountant also distinguished between operating and non-operating expenses, correctly classifying utilities, office salaries, interest, and other expenses to prepare an accurate pre-tax income statement.

Finally, to derive net earnings, the accountant applied the 25% tax rate to the pre-tax profit, accurately reflecting the company's tax obligations. The meticulous examination and adjustment of each line item required a comprehensive understanding of accounting terminology, proper classification of expenses and revenues, and attention to detail.

This analytical process enabled the experienced accountant to correct the initial figures, ensuring that the financial statement now accurately depicts Simon Company's financial health. Such critical analysis exemplifies the importance of accounting expertise in preparing precise and reliable financial statements, which are crucial for internal decision-making and external reporting.

References

• Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2020). Intermediate Accounting (16th ed.). Wiley.
• Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting, IFRS Edition (4th ed.). Wiley.
• Horngren, C. T., Sundem, G. L., Elliott, J. A., & Philbrick, D. (2018). Introduction to Financial Accounting (11th ed.). Pearson.
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• Heisinger, K., & Hoyle, J. (2020). Financial & Managerial Accounting (7th ed.). Cengage Learning.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2020). Managerial Accounting (16th ed.). McGraw-Hill Education.
• Gibson, C. H. (2018). Financial Reporting and Analysis (15th ed.). Cengage Learning.
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• White, G. I., Sondhi, A. C., & Fried, D. (2015). The Analysis and Use of Financial Statements (3rd ed.). Wiley.
• Accounting Standards Codification (ASC), Financial Accounting Standards Board (FASB). (2023).