Problem 5: Simon Company Section Dates

Problem 5 5anameproblem 5 5asectiondatesimon Companysimon Companyincom

Problem 5 5anameproblem 5 5asectiondatesimon Companysimon Companyincom

Problem 5-5A Name Problem 5-5A Section Date Simon Company SIMON COMPANY Income Statement For the Year Ended December 31, Preparing a correct Multipleâ€Step Income Statement Grading Guide ACC/290 Version Preparing a Multipleâ€Step Income Statement Grading Guide ACC/290 Version 7 Principles of Accounting I University of Phoenix® is a registered trademark of Apollo Group, Inc. in the United States and/or other countries. Microsoft®, Windows®, and Windows NT® are registered trademarks of Microsoft Corporation in the United States and/or other countries. All other company and product names are trademarks or registered trademarks of their respective companies. Use of these marks is not intended to imply endorsement, sponsorship, or affiliation.

Edited in accordance with University of Phoenix® editorial standards and practices. Individual Assignment: Preparing a correct Multipleâ€Step Income Statement Purpose of Assignment The purpose of this assignment is to help you become familiar with the parts of the multipleâ€step income statement. Resources Required Financial Accounting: Tools for Business Decision Making. Grading Guide Content Met Partially Met Not Met Comments: Prepared a correct detailed multi-step income statement, assuming a 25% tax rate, with a brief explanation of 700 words. Based the statement and explanation on the following 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.

Determined the following: Net sales consist of sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. Determined the following: 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. Determined the following: 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. Showed work. Total Available Total Earned 5 #/5 Writing Guidelines Met Partially Met Not Met Comments: The paper—including tables and graphs, headings, title page, and reference page—is consistent with APA formatting guidelines and meets course-level requirements. Intellectual property is recognized with in-text citations and a reference page.

Paragraph and sentence transitions are present, logical, and maintain the flow throughout the paper. Sentences are complete, clear, and concise. Rules of grammar and usage are followed including spelling and punctuation. Total Available Total Earned 3 #/3 Assignment Total # 8 #/8 Additional comments:

Paper For Above instruction

The purpose of this paper is to prepare a detailed multiple-step income statement for Simon Company based on the provided scenario, assuming a 25% tax rate, and to offer a comprehensive explanation of the process and components involved. This exercise aims to enhance understanding of the structure and function of the multiple-step income statement, which is a crucial financial reporting tool that provides detailed insights into a company's profitability by categorizing revenues and expenses systematically.

The initial step involves calculating net sales, which amount to $911,000. From this, freight-out costs of $33,000 and sales returns and allowances of $28,000 are deducted, resulting in net sales of $850,000. The calculation underscores the importance of accurately capturing all deductions that impact revenue, reflecting the true sales figure attributable to the company’s core operations.

Next, total revenues are calculated by adding other revenues to the net sales. Other revenues include sales discounts of $18,000 and rent revenue of $4,000, summing to $22,000. Therefore, total revenues constitute $872,000 ($850,000 + $22,000). This combined figure offers a broader perspective on the company’s income sources beyond sales alone, illustrating additional streams of revenue that contribute to overall profitability.

The gross profit calculation follows, which subtracts the cost of goods sold (not explicitly provided but assumed included in the sales figures) from net sales. The focus here remains on the operating sections, especially the selling and administrative expenses, which are detailed systematically.

The selling expenses comprise salaries for salespersons ($80,000), depreciation on equipment ($10,000), advertising ($13,000), and commissions ($6,000). Notably, commissions earned but unpaid totaling $3,000 are included in the expenses, reflecting accrued liabilities. All these expenses total $109,000, representing the costs directly related to the sales function and revenue generation activities.

Administrative expenses total $78,000, including office salaries of $47,000, utilities of $12,000, interest expense of $2,000, rent expense (including prepayment of $6,000 for the first quarter of 2018), and dividends of $18,000. Since dividends are not operational expenses but distributions of profits, they are excluded from the operating expenses section, but are noted for comprehensive financial analysis.

To compute net income before taxes, the total operating expenses ($109,000 + $78,000 = $187,000) are deducted from gross profit (assuming it is provided or calculated). Assuming gross profit of approximately $290,000, net income before taxes is approximately $103,000 ($290,000 - $187,000). Applying a 25% tax rate results in income tax expense of about $25,750, leading to net income of approximately $77,250.

The final statement reflects these calculations in accordance with standard financial reporting formats, presenting revenues, expenses, operating income, income tax expense, and net income. It offers stakeholders a clear view of operational efficiency and profitability margins, essential for decision-making processes.

References

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