Appendix I
Review Exercise Solutions
415
Part 2
a) Prepare 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
Inventory, January 1, 2016
16,140
Purchases
$70,000
Less: Purchase Returns and Allowances
$5,800
Purchase Discounts
3,200 (9,000)
Net Purchases
61,000
Freight-In
1,000
62,000
Cost of Goods Available For Sale
78,140
Inventory, December 31, 2016
33,440
Cost of Goods Sold
44,700
Gross Profit
66,220
Operating Expenses
Depreciation Expense
5,000
Insurance Expense
2,500
Rent Expense
6,000
Salaries Expense
11,000
Supplies Expense
4,500
Utilities Expense
750
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
