Question

The following selected accounts and their current balances appear in the ledger of Clairemont Co. for the fiscal year ended May 31, 20Y2:

Cash $ 240,000
Accounts receivable 966,000
Inventory 1,690,000
Estimated returns inventory 22,500
Office supplies 13,500
Prepaid insurance 8,000
Office equipment 830,000
Accumulated depreciation-office equipment 550,000
Store equipment 3,600,000
Accumulated depreciation-store equipment 1,820,000
Accounts payable 326,000
Customer refunds payable 40,000
Salaries payable 41,500
Note payable (final payment due in 6 years) 300,000
Common stock 500,000
Retained earnings 2,949,100
Dividends 100,000
Sales 11,343,000
Cost of goods sold 7,850,000
Sales salaries expense 916,000
Advertising expense 550,000
Depreciation expense-store equipment 140,000
Miscellaneous selling expense 38,000
Office salaries expense 650,000
Rent expense 94,000
Depreciation expense-office equipment 50,000
Insurance expense 48,000
Office supplies expense 28,100
Miscellaneous administrative expense 14,500
Interest expense 21,000
Required:
1. Prepare a multiple-step income statement. Be sure to complete the statement heading. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
2. Prepare a statement of stockholders’ equity. Additional common stock of $75,000 was issued during the year ended May 31, 20Y2. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
3. Prepare a balance sheet, assuming that the current portion of the note payable is $50,000. Be sure to complete the statement heading. Refer to the problem data and the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
4. Briefly explain how multiple-step and single-step income statements differ.

Answer 1

To prepare a multiple-step income statement, calculate operating revenues, deduct the cost of goods sold and expenses, and obtain net income. Single-step income statement calculates total revenues and deducts total expenses to find net income.

Step-by-step explanation:

To prepare a multiple-step income statement, you need to follow the steps below:

1. Calculate the operating revenues by adding up sales and deducting estimated returns from the sales.
2. Deduct the cost of goods sold from the operating revenues to obtain the gross profit.
3. Subtract the selling expenses (sales salaries expense, advertising expense, and miscellaneous selling expense) from the gross profit to get the operating income.
4. Subtract the administrative expenses (depreciation expense equipment, office salaries expense, rent expense, depreciation expense equipment, insurance expense, office supplies expense, and miscellaneous administrative expense) from the operating income.
5. Subtract the interest expense from the operating income to calculate the income before taxes.
6. Subtract the income tax expense from the income before taxes to obtain the net income for the year.

The single-step income statement, on the other hand, calculates the total revenues and deducts the total expenses in a single step to determine the net income.

It does not provide detailed breakdowns of different types of revenues and expenses like the multiple-step income statement.