Multi-step Income Statement and Adjusting Entries
The Boston Trading Company, whose accounting year ends on December 31, had the following normal balances in its general ledger at December 31:
| Cash |
$15,000 |
| Accounts Receivable |
56,600 |
| Inventory |
74,000 |
| Prepaid Insurance |
3,000 |
| Office Supplies |
4,200 |
| Furniture & Fixtures |
21,000 |
| Accumulated Depreciation - Furn. & Fixtures |
7,000 |
| Delivery Equipment |
86,000 |
| Accumulated Depreciation - Delivery Equipment |
12,000 |
| Accounts Payable |
43,000 |
| Long-term Notes Payable |
28,000 |
| Common Stock |
70,000 |
| Retained Earnings |
56,400 |
| Sales Revenue |
610,000 |
| Cost of Goods Sold |
394,000 |
| Utilities Expense |
4,800 |
| Sales Salaries Expense |
77,000 |
| Delivery Expense |
10,800 |
| Advertising Expense |
5,600 |
| Rent Expense |
9,400 |
| Office salaries expense |
56,000 |
| Income Tax Expense |
9,000 |
During the year, the accounting department prepared monthly statements but no adjusting entries were made in the journals and ledgers. Data for the year-end procedures are as follows:
| 1. Prepaid insurance, December 31 |
$1,500 |
| 2. Depreciation Expense on furniture and fixtures for year |
$2,000 |
| 3. Depreciation Expense on delivery equip. for the year |
$11,000 |
| 4. Salaries Payable, December 31 ($1,800 Sales and $1,200 Office) |
$3,000 |
| 5. Unused office supplies on December 31 |
$1,200 |
Required
a. Record the necessary adjusting entries at December 31.
b. Prepare a multi-step income statement for the year. Combine all the operating expenses into one line on the income statement for selling, general and administrative expenses.