Inventory and COGS Valuation, Multi-Step Income Statement , accounting homework help

It is the end of a reporting period. Because there are more people than usual retiring this year, your manager has asked your accounting department to create 2 things:

• A process documentation detailing the different methods of preparing income statements, specific sections of the income statement, and how to handle the special types of income statement items
• Basic financial statements for your company

Individual Portion:

1. Visit the SEC’s Web site (http://idea.sec.gov/idea/searchidea/companysearch_idea.html).
2. Select a company filing of your choice that contains a multiple-step income statement.
3. I will let you know which Company, once I select the Tutor

1. Prepare a process documentation that
   • is prepared in a professional manner because it will be the desktop guide used by others in the event of your absence to prepare the financial statements for Music Warehouse.
   • is in the form of a memorandum or as a numbered listing of items, depending on your individual preference.
   • includes the following elements:
     • a definition and description of the specific sections of the income statement
     • a description of the different methods of preparing income statements
     • an explanation of the conceptual guidelines for reporting income
     • how to handle the special types of income statement items

Please add your file.

Using the information below, do the following:

• 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%