Financial Accounting: An Integrated Statements Approach, 2nd Edition

The following selected accounts and their current balances appear in the ledger of Sciatic Co. for

the fiscal year ended July 31, 2006:

Cash $123,000 Sales $1,028,000

Accounts Receivable 96,800 Sales Returns and Allowances 18,480

Merchandise Inventory 140,000 Sales Discounts 17,520

Office Supplies 4,480 Cost of Merchandise Sold 620,000

Prepaid Insurance 2,720 Sales Salaries Expense 138,560

Office Equipment 68,000 Advertising Expense 35,040

Accumulated Depreciation— Depreciation Expense—

Office Equipment 10,240 Store Equipment 5,120

Store Equipment 122,400 Miscellaneous Selling Expense 1,280

Accumulated Depreciation— Office Salaries Expense 67,320

Store Equipment 27,360 Rent Expense 25,080

Accounts Payable 44,480 Depreciation Expense—

Salaries Payable 1,920 Office Equipment 10,160

Note Payable Insurance Expense 3,120

(final payment due 2016) 44,800 Office Supplies Expense 1,040

Capital Stock 75,000 Miscellaneous Administrative

Retained Earnings 301,600 Expense 1,280

Dividends 28,000 Interest Expense 4,000

Instructions

1. Prepare a multiple-step income statement.


2. Prepare a retained earnings statement.


3. Prepare a report form of balance sheet, assuming that the current portion of the note payable
   is $6,000.


4. Briefly explain how multiple-step and single-step income statements differ.

Selected accounts and related amounts for Sciatic Co. for the fiscal year ended July 31, 2006, are

presented in Alternate Problem 5-1B.

Instructions

1. Prepare a single-step income statement.


2. Prepare a retained earnings statement.

The following selected transactions were completed by Holistic Supply Co., which sells office

supplies primarily to wholesalers and occasionally to retail customers:

Aug. 2 Sold merchandise on account to Runyan Co., $12,800, terms FOB destination, 2/10,

n/30. The cost of merchandise sold was $7,600.

3 Sold merchandise for $5,000 plus 7% sales tax to cash customers. The cost of mer-

chandise sold was $3,000.

4 Sold merchandise on account to McNutt Co., $2,800, terms FOB shipping point,

n/eom. The cost of merchandise sold was $1,800.

5 Sold merchandise for $4,400 plus 7% sales tax to customers who used MasterCard.

Deposited credit card receipts into the bank. The cost of merchandise sold was $2,500.

12 Received check for amount due from Runyan Co. for sale on August 2.

14 Sold merchandise to customers who used American Expresscards, $15,000. The cost

of merchandise sold was $9,200.

254 Chapter 5 Accounting for Merchandise Operations

Alternate Problem

5-1B

Multiple-step income state-

ment, retained earnings state-

ment, and report form of

balance sheet

Goal 2

1. Net income, $80,000

Alternate Problem

5-2B

Single-step income statement

and retained earnings state-

ment

Goal 2

Alternate Problem

5-3B

Sales-related transactions

Goals3, 5

GENERAL LEDGER

ALTERNATE ACCOUNTING APPLICATION PROBLEMS