View the step-by-step solution to: Exercise 4-4 [Multiple step and Single-Step Income Statements:Two

Exercise 4-4 [Multiple step and Single-S...
This question was answered on Dec 18, 2011. View the Answer
Exercise 4-4 [Multiple step and Single-Step Income Statements:Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2010 information related to Webster Company ($000 omitted)] Exercise 4-11 [McEntire Corporation began operations on January 1, 2007. During its first 3 years of operations, McEntire reported net income and declared dividends as follows.] Exercise 18-2 [On June 3, Hunt Company sold to Ann Mount merchandise having a sale price of $8,000 with terms 2/10, n/60, f.o.b. shipping point. An invoice totaling $120 terms n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost. Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing $600 contained flaws that rendered it worthless. The same day Hunt Company issued a credit memo covering the worthless merchandise and asked that it be returned at company expense. The freight on the returned merchandise was $24 paid by Hunt Company on June 7. On June 12, the company received a check for the balance due from Mount.] Excel worksheet uploaded to input answers.
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Name:
Exercise: E4-4, Multiple-step and Single-step Income
Statements
Course:
Date:
Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income
statement in a multiple-step versus a single-step format. The discussion involves the following 2010
information related to Webster Company ($000 omitted).
Administrative expenses
Officers' salaries
Depreciation of office furniture and equipment
Cost of goods sold
Rental revenue
Selling expenses
Transportation-out
Sales commissions
Depreciation of sales equipment
Sales
Income tax
Interest expense

$4,900
3,960
63,570
17,230
2,690
7,980
6,480
96,500
7,580
1,860

Instructions:
(a) Prepare an income statement for the year 2010 using the multiple-step form. Common shares
outstanding for 2010 total
40,550
(000 omitted).
WEBSTER COMPANY
Multi-Step Income Statement
For the Year Ended December 31, 2010
(In thousands, except earnings per share)
Title
Title
Title

Amount
Amount
Formula

Operating Expenses
Title
Account Title
Account Title
Account Title
Title
Account Title
Account Title
Title

Amount
Amount
Amount

Formula

Amount
Amount

Formula

Other Revenues and Gains
Account Title

Formula
Formula

Amount
Formula

Other Expenses and Losses
Account Title

Amount

Income before taxes
Account Title
Net income

Formula
Amount
Formula

Earnings per share

Formula

(b) Prepare an income statement for the year 2010 using the single-step form. Common shares
outstanding for 2010 total
40,550
(000 omitted).
WEBSTER COMPANY
Single-Step Income Statement
For the Year Ended December 31, 2010
(In thousands, except earnings per share)
Revenues
Net sales
Title
Total revenues
Expenses
Title
Title
Title
Title
Total expenses

Amount
Amount
Formula

Amount
Amount
Amount
Amount
Formula

Income before taxes
Title
Net income

Formula
Amount
Formula

Earnings per share

Formula

(c) Which one do you prefer? Discuss.
Single-step:

Multiple-step:

Exercise 4-4, Page 2 of 4, 08/04/2012, 22:44:36

Name:
Exercise:
Course:
Date:

E4-11, Retained Earnings Statement (20-25 minutes)

McEntire Corporation began operations on January 1, 2007. During its first 3 years of operations, McEntire
reported net income and declared dividends as follows.
Year
2007
2008
2009

Net income
$40,000
125,000
160,000

Dividends declared
$0
50,000
50,000

The following information relates to 2010:
Income before income taxes
Prior period adjustment: Understatement of 2008 depreciation expense.
(Before taxes)
Cumulative decrease in income from change in inventory methods (before taxes)
Dividends declared
Of the dividends declared to date, the amount that will be paid on Jan 15, 2011 is:
Effective tax rate

$220,000
$25,000
$45,000
$100,000
$25,000
40%

Instructions:
(a) Prepare a 2010 retained earnings statement for McEntire Corporation.
McENTIRE CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2010
Balance, January 1, as reported
Title
Title

Amount
Amount
Amount
Formula
Amount
Formula
Amount
Formula

Title
Add: Net income
Title
Title

(b) Assume McEntire Corp. restricted retained earnings in the amount of
$70,000
on December 31, 2010. After this action, what would McEntire report as total retained earnings in its
December 31, 2010, balance sheet?
Enter text answer here.

Retained earnings
Appropriated
Unappropriated
Total

Amount
Amount
Amount

Name:
Exercise:
Course:
Date:

E18-2, Sales Recorded Both Gross and Net

On June 3, Hunt Company sold to Ann Mount merchandise having a sale price of
$8,000
with terms 2/10, n/60, f.o.b. shipping point. An invoice totaling
$120
terms n/30, was received by Mount on June 8 from the Olympic Transport Service for the freight cost.
Upon receipt of the goods, June 5, Mount notified Hunt Company that merchandise costing
$600
contained flaws that rendered it worthless. The same day Hunt Company issued a
credit memo covering the worthless merchandise and asked that it be returned at company expense.
The freight on the returned merchandise was
$24
paid by Hunt Company on June 7. On
June 12, the company received a check for the balance due from Mount.
Instructions:
(a) Prepare journal entries on Hunt Company books to record all the events noted above under each
of the following bases.
(1) Sales and receivables are entered at gross selling price.
Jun 3
Jun 5
Jun 7

Jun 12

Account Title
Account Title

Amount

Account Title
Account Title

Amount

Account Title
Account Title

Amount

Account Title
Account Title
Account Title

Amount
Amount

Amount

Amount
Amount

Amount

(2) Sales and receivables are entered net of cash discounts.
Jun 3

Jun 5
Jun 7
Jun 12

Account Title
Account Title

Amount

Account Title
Account Title

Amount

Account Title
Account Title

Amount

Account Title
Account Title

Amount

Amount
Amount
Amount

Amount

(b) Prepare the journal entry under basis 2, assuming that Ann Mount did not remit payment until
August 5.
Aug 5
Account Title
Amount
Account Title
Amount
Account Title
Amount

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