Appendix I
Review Exercise Solutions
411
c) Prepare a classified multistep income statement
George’s Gardening Supplies
Income Statement
For the Year Ended December 31, 2016
Sales Revenue
$113,500
Less: Sales Returns and Allowances
$1,000
Sales Discounts
1,580
(2,580)
Net Sales
110,920
Cost of Goods Sold
44,700
Gross Profit
66,220
Operating Expenses
Selling Expenses
Depreciation Expense
$5,000
Insurance Expense
1,750
Rent Expense
4,200
Salaries Expense
7,700
Utilities Expense
525
Total Selling Expenses
19,175
Administrative Expenses
Insurance Expense
750
Rent Expense
1,800
Salaries Expense
3,300
Supplies Expense
4,500
Utilities Expense
225
Total Administrative Expenses
10,575
Total Operating Expenses
29,750
Operating Income
36,470
Other Revenue and Expenses
Interest Revenue
6,500
Interest Expense
(2,600)
3,900
Net Income
$40,370
d) Statement of owner’s equity
George’s Gardening Supplies
Statement of Owner’s Equity
For the Year Ended December 31, 2016
Gregg, Capital at January 1, 2016
$80,000
Add
Additional Investment
$10,000
Net Income
40,370
50,370
Subtotal
130,370
Less
Gregg, Drawings
5,000
Gregg, Capital at December 31, 2016
$125,370
