An inexperienced accountant prepared this condensed income statement




P5-5B An inexperienced accountant prepared this condensed income statement for


Wright Company, a retail firm that has been in business for a number of years.




Income Statement


For the Year Ended December 31, 2014




Net sales       $952,000


Other revenues 16,000




Cost of goods sold 548,000


Gross profit 420,000


Operating expenses


Selling expenses 160,000


Administrative expenses 104,000




Net earnings $156,000


As an experienced, knowledgeable accountant, you review the statement and determine the following facts.


1. Net sales consist of sales $972,000, less freight-out on merchandise sold $20,000.


2. Other revenues consist of sales discounts $12,000 and interest revenue $4,000.


3. Selling expenses consist of salespersons’ salaries $88,000; depreciation on equipment $4,000; sales returns and allowances $46,000; advertising $12,000; and sales commissions $10,000. All compensation should be recorded as Salaries and Wages Expense.


4. Administrative expenses consist of office salaries $54,000; dividends $14,000; utilities $13,000; interest expense $3,000; and rent expense $20,000, which includes


prepayments totaling $2,000 for the first month of 2015. The utilities represent


utilities paid. At December 31, utility expense of $3,000 has been incurred but not








Prepare a correct detailed multiple-step income statement.  Assume a tax rate of 25%.