The following selected accounts and their current balances appear in the ledger of Gloucester Co. for the fiscal year ended August 31, 2014

The following selected accounts and their current balances appear in the ledger of Gloucester Co. for the fiscal year ended August 31, 2014:




















Cash $ 125,000 Sales $4,576,000
Accounts Receivable 335,000 Sales Returns and Allowances 31,000
Merchandise Inventory 380,000 Sales Discounts 28,000
Office Supplies 12,000 Cost of Merchandise Sold 2,650,000
Prepaid Insurance 9,000 Sales Salaries Expense 745,000
Office Equipment 275,000 Advertising Expense 205,000
Accumulated Depreciation— Depreciation Expense—
Office Equipment 187,000 Store Equipment 40,000
Store Equipment 859,000 Miscellaneous Selling Expense 18,000
Accumulated Depreciation— Office Salaries Expense 410,000
Store Equipment 293,000 Rent Expense 60,000
Accounts Payable 193,000 Depreciation Expense—
Salaries Payable 12,000 Office Equipment 30,000
Note Payable Insurance Expense 18,000
(final payment due 2037) 400,000 Office Supplies Expense 11,000
Mia Reynolds, Capital 675,000 Miscellaneous Administrative Exp. 8,000
Mia Reynolds, Drawing 75,000 Interest Expense 12,000


Instructions
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner’s equity.
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $16,000.
4. Briefly explain (a) how multiple-step and single-step income statements differ and (b) how report-form and account-form balance sheets differ.


Answer:













































































1.
GLOUCESTER CO.
Income Statement
For the Year Ended August 31, 2014
Revenue from sales:
Sales $4,576,000
Less: Sales returns and allowances $ 31,000
Sales discounts 28,000 59,000
Net sales $4,517,000
Cost of merchandise sold 2,650,000
Gross profit $1,867,000
Expenses:
Selling expenses:
Sales salaries expense $745,000
Advertising expense 205,000
Depreciation expense—store
equipment 40,000
Miscellaneous selling expense 18,000
Total selling expenses $1,008,000
Administrative expenses:
Office salaries expense $410,000
Rent expense 60,000
Depreciation expense—office
equipment 30,000
Insurance expense 18,000
Office supplies expense 11,000
Miscellaneous administrative
expense 8,000
Total administrative expenses 537,000
Total operating expenses 1,545,000
Income from operations $ 322,000
Other expense:
Interest expense 12,000
Net income $ 310,000
2.
 GLOUCESTER CO.
Statement of Owner’s Equity
For the Year Ended August 31, 2014
Mia Reynolds, capital, September 1, 2013 $675,000
Net income for the year $310,000
Less withdrawals 75,000
Increase in owner’s equity 235,000
Mia Reynolds, capital, August 31, 2014 $910,000
3.
GLOUCESTER CO.
Balance Sheet
August 31, 2014
Assets
Current assets:
Cash $125,000
Accounts receivable 335,000
Merchandise inventory 380,000
Office supplies 12,000
Prepaid insurance 9,000
Total current assets $ 861,000
Property, plant, and equipment:
Office equipment $275,000
Less accumulated depreciation 187,000 $ 88,000
Store equipment $859,000
Less accumulated depreciation 293,000 566,000
Total property, plant, and equipment 654,000
Total assets $1,515,000
Liabilities
Current liabilities:
Accounts payable $193,000
Salaries payable 12,000
Note payable (current portion) 16,000
Total current liabilities $ 221,000
Long-term liabilities:
Note payable (final payment due 2037) 384,000
Total liabilities $ 605,000
Owner’s Equity
Mia Reynolds, capital 910,000
Total liabilities and owner’s equity $1,515,000
4. a. The multiple-step form of income statement contains various sections for
revenues and expenses, with intermediate balances, and concludes with
net income. In the single-step form, the total of all expenses is deducted
from the total of all revenues. There are no intermediate balances.
b. In the report form of balance sheet, the assets, liabilities, and owner’s
equity are presented in that order in a downward sequence. In the
account form, the assets are listed on the left-hand side, and the liabilities
and owner’s equity are listed on the right-hand side