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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.