11E
Question
The following are selected ledger accounts of Spock Corporation on December 31, 2017.
Cash \( 185,000 Salaries and wages expense (sales) \)284,000
Inventory 535,000 Salaries and wages expense (office) 346,000
Sales revenue 4,275,000 Purchase returns 15,000
Unearned sales revenue 117,000 Sales returns and allowances 79,000
Purchases 2,786,000 Freight-in 72,000
Sales discounts 34,000 Accounts receivable 142,500
Purchase discounts 27,000 Sales commissions 83,000
Selling expenses 69,000 Telephone and Internet expense (sales) 17,000
Accounting and legal services 33,000 Utilities expense (office) 32,000
Insurance expense (office) 24,000 Miscellaneous office expenses 8,000
Advertising expense 54,000 Rent revenue 240,000
Delivery expense 93,000 Casualty loss (before tax) 70,000
Depreciation expense (office equipment) 48,000 Depreciation expense (sales equipment) 36,000
Common stock (\(10 par) 900,000 Interest expense 176,000
Spock’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is \)686,000.
Instructions
Prepare a condensed 2017 income statement for Spock Corporation.
Step-by-Step Solution
VerifiedThe net income for Spock Corporation is $240,240.
Purchase discounts mean an offer given to the buyer to lower the payment amount if the payment is made within a specific time. It helps the seller receive payments from their customers sooner.
| Spock Corporation | ||
| Income Statement | ||
| For the Year Ended on December 31, 2017 | ||
Revenue |
| $4,275,000 |
Sales |
|
|
Less: Sales Discount | 34,000 |
|
Sales Returns and Allowances | 79,000 | 113,000 |
Net Sales Revenue |
| 4,162,000 |
Cost of Goods Sold |
|
|
Inventory | 535,000 |
|
Add: Purchases | 2,786,000 |
|
Freight-in | 72,000 |
|
Less: Purchase Discount | 27,000 |
|
Purchase Return | 15,000 |
|
Cost of Goods purchased | 2,816,000 |
|
Cost of Goods available for sale | 3,351,000 |
|
Less: Inventory on December 31 | 686,000 |
|
Cost of Goods sold |
| 2,665,000 |
Gross Profits on Sale |
| 1,497,000 |
Other operating revenues and gains |
|
|
Rent Revenue | 240,000 |
|
Total Revenues |
| 1,737,000 |
Other operating expenses |
|
|
Selling and Distribution Expenses |
|
|
Selling Expenses | 69,000 |
|
Advertising Expenses | 54,000 |
|
Delivery Expenses | 93,000 |
|
Depreciation Expenses (Sale equipment) | 36,000 |
|
Salary and wages | 284,000 |
|
Sales commission | 83,000 |
|
Telephone and Internet Expenses | 17,000 |
|
General and Administrative Expenses |
|
|
Accounting and Legal Expenses | 33,000 |
|
Insurance Expenses | 24,000 |
|
Depreciation Expenses | 48,000 |
|
Salary and Wages expenses | 346,000 |
|
Utility Expenses | 32,000 |
|
Miscellaneous Expense | 8,000 |
|
Total Expenses |
| 1,127,000 |
Operating Income |
| 610,000 |
Less: Casualty Loss | 70,000 |
|
Interest | 176,000 | 246,000 |
Income before income tax |
| 364,000 |
Less: Income tax expense |
| 123,760 |
Net Income |
| $240,240 |