Chapter 4 Solutions - CHAPTER 4 Income Statement and...

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Unformatted text preview: CHAPTER 4 Income Statement and Related Information 4-1 EXERCISE 4-6 (3040 minutes) (a) Multiple-Step Form Whitney Houston Shoe Co. Income Statement For the Year Ended December 31, 2007 Net sales........................................................ $980,000 Cost of goods sold....................................... 496,000 Gross profit on sales................................... 484,000 Operating Expenses Selling expenses Wages and salaries.......................... $114,800 Depr. exp. (70% X $65,000).............. 45,500 Materials and supplies..................... 17,600 $177,900 Administrative expenses Wages and salaries.......................... 135,900 Other admin. expenses.................... 51,700 Depr. exp. (30% X $65,000).............. 19,500 207,100 385,000 Income from operations.............................. 99,000 Other Revenues and Gains Rental revenue........................................ 29,000 128,000 Other Expenses and Losses Interest expense..................................... 18,000 Income before income tax........................... 110,000 Income tax............................................... 37,400 Net income.................................................... $ 72,600 Earnings per share ($72,600 20,000)....... $3.63 4-2 EXERCISE 4-6 (Continued) (b) Single-Step Form Whitney Houston Shoe Co. Income Statement For the Year Ended December 31, 2007 Revenues Net sales......................................................................... $ 980,000 Rental revenue............................................................... 29,000 Total revenues......................................................... 1,009,000 Expenses Cost of goods sold........................................................ 496,000 Selling expenses............................................................ 177,900 Administrative expenses.............................................. 207,100 Interest expense............................................................ 18,000 Total expenses......................................................... 899,000 Income before income tax.................................................. 110,000 Income tax...................................................................... 37,400 Net income............................................................................ $ 72,600 Earnings per share ($72,600 20,000).............................. $3.63 Note: An alternative income statement format for the single-step form is to show income tax as part of expense, and not as a separate item. (c) Single-step: 1. Simplicity and conciseness. 2. Probably better understood by users. 3. Emphasis on total costs and expenses and net income....
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This homework help was uploaded on 03/19/2008 for the course ACC 326 taught by Professor Atiase during the Spring '08 term at University of Texas at Austin.

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Chapter 4 Solutions - CHAPTER 4 Income Statement and...

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