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Karla Company provided the following information for the current year: 5,250,000 150,000 250,000 Purchases Purchase returns and allowances Rental income Selling expenses: Freight out Salesmen's commission Depreciation - store equipment Merchandise inventory, January 1 Merchandise inventory, December 31 Sales Sales returns and allowances Sales discounts Administrative expenses: Officers' salaries Depreciation- office equipment Freight in Income tax 175,000 650,000 125,000 1,000,000 1,500,000 7,850,000 140,000 10,000 500,000 300,000 500,000 250,000 50,000 100,000 150,000 50,000 Loss on sale of equipment Purchase discounts Dividend revenue Loss on sale of investment Required: a. Prepare an income statement for the year using the "functional" method with supporting notes. b. Prepare an income statement for the year using the "natural" method with supporting notes

Karla Company provided the following information for the current year: 5,250,000 150,000 250,000 Purchases Purchase returns and allowances Rental income Selling expenses: Freight out Salesmen's commission Depreciation - store equipment Merchandise inventory, January 1 Merchandise inventory, December 31 Sales Sales returns and allowances Sales discounts Administrative expenses: Officers' salaries Depreciation- office equipment Freight in Income tax 175,000 650,000 125,000 1,000,000 1,500,000 7,850,000 140,000 10,000 500,000 300,000 500,000 250,000 50,000 100,000 150,000 50,000 Loss on sale of equipment Purchase discounts Dividend revenue Loss on sale of investment Required: a. Prepare an income statement for the year using the "functional" method with supporting notes. b. Prepare an income statement for the year using the "natural" method with supporting notes

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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"Functional" income statement EXAMPLAR COMPANY Income Statement Year ended December 31, 2020 Net sales Cost of goods sold Note (1) (2) 9,000,000 (5,400,000) Gross income Other income Investment income 3,600,000 900,000 500,000 (3) (4) Total income 5,000,000 Expenses: Distribution costs Administrative expenses Other expenses Finance cost 1,350,000 (6) 1,000,000 320,000 200,000 (7) (8) 2,870,000 Income before tax Income tax expense 2,130,000 580,000 Net income 1,550,000 Note 1- Net sales Gross sales Sales return and allowance Sales discount 9,300,000 ( 100,000) ( 200,000) Net sales 9,000,000 Note 2 - Cost of goods sold 1,500,000 Inventory, January 1 Purchases Freight in 6,000,000 300,000 6,300,000 ( 150,000) ( 250,000) Total Purchase return and allowance Purchase discount 5,900,000 7,400,000 Goods available for sale Inventory, December 31 (2,000,000) 5,400,000 Cost of sales
Transcribed Image Text:"Functional" income statement EXAMPLAR COMPANY Income Statement Year ended December 31, 2020 Net sales Cost of goods sold Note (1) (2) 9,000,000 (5,400,000) Gross income Other income Investment income 3,600,000 900,000 500,000 (3) (4) Total income 5,000,000 Expenses: Distribution costs Administrative expenses Other expenses Finance cost 1,350,000 (6) 1,000,000 320,000 200,000 (7) (8) 2,870,000 Income before tax Income tax expense 2,130,000 580,000 Net income 1,550,000 Note 1- Net sales Gross sales Sales return and allowance Sales discount 9,300,000 ( 100,000) ( 200,000) Net sales 9,000,000 Note 2 - Cost of goods sold 1,500,000 Inventory, January 1 Purchases Freight in 6,000,000 300,000 6,300,000 ( 150,000) ( 250,000) Total Purchase return and allowance Purchase discount 5,900,000 7,400,000 Goods available for sale Inventory, December 31 (2,000,000) 5,400,000 Cost of sales
Karla Company provided the following information for the Problem 9-1 (IAA) Karla Company provided the following information for 41 current year: 5,250,000 150,000 250,000 Purchases Purchase returns and allowances Rental income Selling expenses: Freight out Salesmen's commission Depreciation - store equipment Merchandise inventory, January 1 Merchandise inventory, December 31 Sales Sales returns and allowances Sales discounts Administrative expenses: Officers' salaries Depreciation - office equipment Freight in Income tax Loss on sale of equipment Purchase discounts Dividend revenue Loss on sale ofinvestment 175,000 650,000 125,000 1,000,000 1,500,000 7,850,000 140,000 10,000 500,000 300,000 500,000 250,000 50,000 100,000 150,000 50,000 Required: a. Prepare an income statement for the year using the "functional" method with supporting notes. D. Prepare an income statement for the year using the "natural" method with supporting notes.
Transcribed Image Text:Karla Company provided the following information for the Problem 9-1 (IAA) Karla Company provided the following information for 41 current year: 5,250,000 150,000 250,000 Purchases Purchase returns and allowances Rental income Selling expenses: Freight out Salesmen's commission Depreciation - store equipment Merchandise inventory, January 1 Merchandise inventory, December 31 Sales Sales returns and allowances Sales discounts Administrative expenses: Officers' salaries Depreciation - office equipment Freight in Income tax Loss on sale of equipment Purchase discounts Dividend revenue Loss on sale ofinvestment 175,000 650,000 125,000 1,000,000 1,500,000 7,850,000 140,000 10,000 500,000 300,000 500,000 250,000 50,000 100,000 150,000 50,000 Required: a. Prepare an income statement for the year using the "functional" method with supporting notes. D. Prepare an income statement for the year using the "natural" method with supporting notes.
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