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    Multiple-Step Income Statement for Music Warehouse

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    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%
    (*Please see the attachment for the formatted chart.)

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    Solution Summary

    Your tutorial is in excel, attached, showing a multi-step income statement and a change in equity statement. Click in cells to see computations, especially for extraordinary items which must be reported net of tax.