Prepare a single-step income statement for the year
Mega Inc. was organized on Apr1, 2014, by two people who recognized an opportunity to make money while spending their days watching TV. They plan to rent 3 wheelers and monster trucks to weekend visitors for some unknown reason. The following transactions occurred during the first month of operations:
Received contribution of $10,000 from each of the two principal owners of the new business in exchange for shares of stock.
Purchased ten 3 wheelers for $400 each on an open account. The company has 30 days to pay for the bicycles.
Registered as a vendor with the city and paid the $25 monthly fee.
Purchased 20 monster trucks at $225 each, 20 extra tires at $50 each, and 20 sets of mufflers at $45 per set for cash.
Purchased $200 in miscellaneous supplies on account. The company has 30 days to pay for the supplies.
Paid $225 bill from local radio station for advertising for the last two weeks of April.
Customers rented 3 wheelers and monster trucks for cash of $1,800.
Billed the local park district $2,200 for driving lessons provided to neighborhood children. The park district is to pay one-half of the bill within five working days and the rest within 30 days.
Received 75% of the amount billed to the park district.
Customers rented 3 wheelers and monster trucks for cash of $4,000.
Paid wages of $260 to a friend who helped over the weekend.
Paid the balance due on the 3 wheelers.
1. Prepare a table, or work papers, to summarize the preceding transactions as they effect the accounting equation as was demonstrated in class. Identify each transaction with the date. Prepare the Balance Sheet and Income Statement.
The following income statement items, arranged in alphabetical order, are taken from the records of Super Corporation for the year ended April 30, 2014:
Advertising expense $2,500
Commissions expense 3,415
Cost of goods sold 39,200
Depreciation expense 3,900
Income tax expense 2,540
Insurance expense 3,250
Interest expense 2,400
Interest revenue 2,340
Rent revenue 7,700
Salaries expense 22,560
Sales revenue 58,300
Supplies expense 990
1. Prepare a single-step income statement for the year ended April 30, 2014.
2. Prepare a multiple-step income statement for the year ended April 30, 2014.
3. What are the advantages of the multiple-step income statement?
4. Compute Super’s profit margin.