Inventory and COGS Valuation, Multi-Step Income Statement , accounting homework help

It is the end of a reporting period. Because there are more people than usual retiring this year, your manager has asked your accounting department to create 2 things:

  • A process documentation detailing the different methods of preparing income statements, specific sections of the income statement, and how to handle the special types of income statement items
  • Basic financial statements for your company

Individual Portion:

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  1. Visit the SEC’s Web site (http://idea.sec.gov/idea/searchidea/companysearch_idea.html).
  2. Select a company filing of your choice that contains a multiple-step income statement.
  3. I will let you know which Company, once I select the Tutor
  1. Prepare a process documentation that
    • is prepared in a professional manner because it will be the desktop guide used by others in the event of your absence to prepare the financial statements for Music Warehouse.
    • is in the form of a memorandum or as a numbered listing of items, depending on your individual preference.
    • includes the following elements:
      • a definition and description of the specific sections of the income statement
      • a description of the different methods of preparing income statements
      • an explanation of the conceptual guidelines for reporting income
      • how to handle the special types of income statement items

Please add your file.

Using the information below, do the following:

  • Prepare a multiple-step income statement for Music Warehouse.
  • Prepare a statement of changes in stockholder’s equity for Music Warehouse.

Music Warehouse

Adjusted Trial Balance

December 31, 2008

Debit

Credit

Cash

$24,675

Accounts Receivable

5,625

Inventory

65,980

Land

93,000

Building

289,000

Accumulated Depreciation

75,000

Notes Payable

85,000

Accounts Payable

53,600

Interest Payable

4,750

Common Stock

10,000

Additional Paid-in Capital

120,000

Dividends

10,000

Retained Earnings

59,980

Sales

937,500

Sales Discounts

22,675

Cost of Goods Sold

723,000

Salaries

81,000

Utilities

8,900

Repairs & Maintenance

5,225

Telephone

2,850

Interest Expense

4,400

Depreciation Expense

9,500

$1,345,830

$1,345,830

The following is additional information needed for financial-statement preparation:

  • Loss as a result of hurricane damage on the building: $17,000 (assume that the building is not located in an area that sustains frequent hurricane damage.)
  • Loss because of the discontinuation of the cassette tape music segment: $26,875
  • Beginning of the year balance of common stock: $8,000 (assume that changes are related to issuance of common stock.)
  • Beginning of the year balance of additional paid-in capital: $102,000
  • Effective income tax rate: 35%

 
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