an inexperienced accountant prepared this condensed income statement for mcdowell co 533586

An inexperienced accountant prepared this condensed income statement for McDowell Company, a retail firm that has been in business for a number of years.

As an experienced, knowledgeable accountant, you review the statement and determine the following facts.

1. Net sales consist of sales $911,000, less freight-out expense on merchandise sold $33,000, and sales returns and allowances $28,000.

2. Other revenues consist of sales discounts $18,000 and rent revenue $8,000.

3. Selling expenses consist of salespersons” salaries $80,000; depreciation on equipment $10,000; advertising $15,000; and sales commissions $6,000. The commissions represent commissions paid. At December 31, $3,000 of commissions have been earned

by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense.

4. Administrative expenses consist of office salaries $47,000; dividends $18,000; utilities $12,000; interest expense $2,000; and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2013.

Instructions

Prepare a correct detailed multiple-step income statement. Assume a 25% tax rate.