Question

Psymon Company, Inc. sells construction equipment. The annual fiscal period ends on December 31. The following adjusted trial balance was created from the general ledger accounts on December 31:________.

Account Titles Debits Credits
Cash $ 45,190
Accounts Receivable 19,200
Inventory 69,500
Property and Equipment 53,000
Accumulated Depreciation $ 22,300
Liabilities 32,100
Common Stock 96,000
Retained Earnings, January 1 12,200
Sales Revenue 195,500
Sales Returns and Allowances 7,300
Sales Discounts 8,600
Cost of Goods Sold 105,200
Salaries and Wages Expense 18,200
Office Expense 19,200
Interest Expenses 2,300
Income Tax Expense 10,410
Totals $ 358,100 $ 358,100
Prepare a multistep income statement that would be used for internal reporting purposes. Treat Sales Discounts and Sales Returns and Allowances as contra-revenue accounts. TIP: Some of the accounts listed will appear on the balance sheet rather than the income statement.
Prepare a multistep income statement that would be used for external reporting purposes, beginning with the amount for Net Sales.
Compute the gross profit percentage.

Answer 1

Prepare a multi-step income statement that would be used for internal reporting purposes.

Psymon Company, Inc.

Income Statement

For the year ended December 31, 202x

Sales revenue $195,500

Sales discounts $8,600

Sales returns and allowances $7,300

Net sales $179,600

Cost of goods sold $105,200

Gross profit $74,400

Expenses:

Salaries and Wages Expense $18,200

Office Expense $19,200

Income from operations $37,000

Interest Expenses $2,300

Income Tax Expense $10,410

Net income $24,290

Prepare a multi-step income statement that would be used for external reporting purposes

Psymon Company, Inc.

Income Statement

For the year ended December 31, 202x

Net sales $179,600

Cost of goods sold ($105,200)

Gross profit $74,400

Gross profit margin 41.43%

Operating expenses:

• Salaries and Wages Expense $18,200
• Office Expense $19,200 ($37,400)

Income from operations (EBIT) $37,000

Other revenues and expenses:

• Interest Expenses $2,300

Earnings before taxes $34,700

Income Tax Expense $10,410

Net income $24,290