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    Multi-Step Income Statement Creation - Music Warehouse

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    The attached file also contains the same information as below but properly formatted. Detailed instructions for the creation of a multi-step income statement.


    Music Warehouse
    Adjusted Trial Balance

    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:
    1). 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.)
    2). Loss because of the discontinuation of the cassette tape music
    segment: $26,875
    3). Beginning of the year balance of common stock: $8,000 (assume that
    changes are related to issuance of common stock.)
    4). Beginning of the year balance of additional paid-in capital: $102,000
    5). Effective income tax rate: 35%

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    Solution Summary

    The attached Excel file illustrates the creation of a multi-step income statement and changes in owners' equity report from provided information for the Music Warehouse exercise.