P4-4 Solutions - Chapter 04 Adjustments Financial Statements and the Quality of Earnings Chapter 0

P4-4 Solutions - Chapter 04 Adjustments Financial...

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The following account balances were included in the trial balance of Twain Corporation at June 30, 2012. The Retained Earnings account had a balance of $337,000 at July 1, 2011. There are 80,000 shares of common stock outstanding. Instructions (a) Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2012. (b) Using the single-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2012. SOLUTION: (a) TWAIN CORPORATION Income Statement For the Year Ended June 30, 2012 Sales Revenue Sales revenue ............................................................................................. $1,578,500 Less: Sales discounts ................................................................................ $31,150 Sales returns and allowances .................................................... 62,300 93,450 Net sales ..................................................................................................... 1,485,050 Cost of goods sold ........................................................................................... 896,770 Gross profit ...................................................................................................... 588,280
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Operating Expenses Selling expenses Sales commissions ................................................................................. $97,600 Salaries and wages exp .......................................................................... 56,260 Travel expense ....................................................................................... 28,930 Freight-out ............................................................................................. 21,400 Entertainment expense ........................................................................... 14,820 Telephone and Internet expense ............................................................ 9,030 Maintenance and repairs expense .......................................................... 6,200 Depreciation expense ............................................................................. 4,980 Bad debt expense ................................................................................... 4,850 Misc. selling expenses ........................................................................... 4,715 248,785 Administrative Expenses Maintenance and repairs expense .............................................. 9,130
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