Multi-Step Income Statement

Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years.
Income Statement
For the Year Ended December 31, 2017
Net sales

Other revenues

Cost of goods sold
Gross profit

Operating expenses
Selling expenses

Administrative expenses

Net earnings

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

Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000.
Other revenues consist of sales discounts $18,000 and rent revenue $4,000.
Selling expenses consist of salespersons’ salaries $80,000, depreciation on equipment $10,000, advertising $13,000, and sales commissions $6,000.  The commissions represent commissions paid. At December 21, $3,000 of commissions have been earned by salespersons but have not been paid.  All compensation should be recorded as Salaries and Wages Expense.
Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018. 

Prepare a detailed multi-step income statement with a brief explanation of 700 words (your explanation must be in a Word document and formatted per APA guidelines). Assume a 25% tax rate. 

 Show your work on the Excel® spreadsheet