Describe the multi-step income statement.
A multi-step income statement presents the operating and non-operating revenues and expenses separately to reflect the net income of a business.
Financial statements are the performance reports of a business concern that present annual financial transactions in a summarized manner. It includes the income statement, balance sheet, cash flow statement, and statement of retained earnings.
In a multi-step income statement, revenues and expenses associated with core operations and secondary events are presented separately.
A multi-step income statement reflects the income from operations and other income separately. It enables the users of financial information to draw effective financial decisions from the segregated data.
Comparing periodic and perpetual inventory systems
For each statement below, identify whether the statement applies to the periodic inventory system, the perpetual inventory system, or both.
a. Normally used for relatively inexpensive goods.
b. Keeps a running computerized record of merchandise inventory.
c. Achieves better control over merchandise inventory.
d. Requires a physical count of inventory to determine the quantities on hand.
e. Uses bar codes to keep up-to-the-minute records of inventory.
Lawrence Appliances had the following purchase transactions. Journalize all necessary transactions using the periodic inventory system. Explanations are not required.
Sep. 4 Purchased inventory of $6,900 on account from Max Appliance Wholesale, an appliance wholesaler. Terms were 3/15, n/30, FOB shipping point.
4 Paid freight charges, $480.
10 Returned $300 of inventory to Max.
17 Paid Max Appliance Wholesale, less return, and discount.
20 Purchased inventory of $3,900 from MY Appliance, an appliance wholesaler. Terms were 1/10, n/45, FOB destination.
22 Received a $400 allowance from MY Appliance for damaged but usable goods.
29 Paid MY Appliance, less allowance and discount.
Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.
Jan. 4 Sold $16,000 of antiques on the account; credit terms are n/30. The cost of goods is $8,000.
8 Received a $300 sales return on damaged goods from the customer. The cost of goods damaged is $150.
13 Antique Mall received payment from the customer on the amount due from Jan. 4, less the return.
20 Sold $4,900 of antiques on the account; credit terms are 1/10, n/45, FOB destination. The cost of goods is $2,450.
20 Antique Mall paid $70 on freight out.
29 Received payment from the customer on the amount due from Jan. 20, less the discount.
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