Warr22e_IM_TM_Ch06 - Transparency Master 6-1 The Income Statement An Expanded View Single-Step Income Statement(Chapters 14 Multiple-Step Income

Warr22e_IM_TM_Ch06 - Transparency Master 6-1 The Income...

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Transparency Master 6-1 The Income Statement— An Expanded View Single-Step Multiple-Step Income Income Statement Statement (Chapters 1–4) (Chapter 6) Revenue from Sales: Sales Sales Returns & Revenues Revenue from Sales Allowances Sales Discounts Net Sales Expenses Cost of Merchandise Sold Gross Profit Operating Expenses: Selling Expenses Operating Expenses + Administrative Expenses Total Operating Expenses Income from Operations + Other Income (i.e., Interest, Rent) Other Expenses (i.e., Interest) Net Income Net Income { {
Transparency Master 6-2 ADJUSTED TRIAL BALANCE Gem City Music Adjusted Trial Balance December 31, 20— Cash ................................................ 11,000 Accounts Receivable ..................... 15,800 Merchandise Inventory .................. 9,600 Office Equipment ........................... 23,000 Accumulated Depreciation— Office Equipment ....................... 9,200 Accounts Payable .......................... 16,000 Salaries Payable ............................. 1,250 M. Marx, Capital .............................. 11,500 M. Marx, Drawing ........................... 12,800 Sales ................................................ 189,300 Sales Returns and Allowances ..... 1,700 Sales Discounts ............................. 500 Cost of Merchandise Sold ............. 100,000 Rent Expense ................................. 7,800 Sales Salaries Expense ................. 17,700 Office Salaries Expense ................ 22,550 Depreciation Expense— Office Equipment ....................... 2,800 Interest Expense ............................ 2,000 Total ................................................ 227,250 227,250 Transparency Master 6-3
INCOME STATEMENT Gem City Music Income Statement For the Year Ended December 31, 20— Revenue from sales: ..................... Sales ....................................... $189,300 Less: Sales returns and allowances ................... $ 1,700 Sales discounts ........... 500 2,200 Net sales ................................... $187,100 Cost of merchandise sold ............ 100,000 Gross profit .................................... $ 87,100 Operating expenses: Selling expenses: Sales salaries expense ....... $17,700 Administrative expenses: Rent expense $ 7,800 Office salaries expense ...... 22,550 Depreciation expense— office equipment ................. 2,800 33,150 Total operating expenses ....... 50,850 Income from operations ............... $ 36,250 Other expense: Interest expense ...................... 2,000 Net income .................................... $ 34,250 Transparency Master 6-4
STATEMENT OF OWNER’S EQUITY Gem City Music Statement of Owner’s Equity For the Year Ended December 31, 20— M. Marx, Capital, January 1, 20--. $11,500 Net income for the year ................ $34,250 Less withdrawals ........................... 12,800 Increase in owner’s equity ........... 21,450 M. Marx, Capital, December 31, 20-- $32,950 Transparency Master 6-5
BALANCE SHEET Gem City Music Balance Sheet December 31, 20— ASSETS Current Assets: Cash ...................................... $11,000 Accounts Receivables ........ 15,800 Merchandise Inventory ....... 9,600 Total Current Assets .... $36,400 Property, Plant & Equipment: Office Equipment ............................ $23,000 Less Accumulated Depreciation 9,200 Total Property, Plant & Equipment 13,800 Total Assets ............................. $50,200 LIABILITIES Current Liabilities: Accounts Payable ............... $16,000 Salaries Payable .................. 1,250 Total Liabilities ............. $17,250 OWNER’S EQUITY M. Marx, Capital ....................... 32,950 Total Liabilities & Owner’s Equity $50,200 Transparency Master 6-6
TWO INVENTORY SYSTEMS PERPETUAL: The Merchandise Inventory account is in- creased when inventory is purchased. The Merchandise Inventory account is de- creased when inventory is sold to a customer. Therefore, the Merchandise Inventory account always (perpetually) shows the amount of in- ventory on hand. PERIODIC: Purchases of inventory are recorded in a Pur- chases account.

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