on september 1, vicario, inc., borrows $100,000 from first national bank at 6 percent annual interest. this note is due in 90 days.

King Co.

1. Schedule of Cost of Goods Sold:

Merchandise inventory, January 1 $12,000

Purchases                                         85,000

Transportation-in                               2,950

Purchase returns and allowances   (2,500 )

Merchandise inventory,                   (10,700 )

Cost of goods sold                         $86,750

2. King Co.'s Multi-step Income Statement

For the year ended December 31:

Net Sales                                  $151,500

Cost of goods sold                     86,750

Gross profit                               $64,750

Expenses:

Miscellaneous expense     1,100

Transportation-out           2,500

Advertising expense        6,500

Salaries expense            21,600

Rent expense                   8,500

Utilities expense               1,750

Total expenses                        $41,950

Operating income                  $22,800

Interest expense                            450

Income before taxes              $22,350

Loss on sale of land                   3,500

Net Income                              $18,850

3. King Co's Single-step Income Statement

For the year ended December 31:

Net Sales                                  $151,500

Cost of goods sold       86,750

Operating expenses     41,950

Interest expense               450

Loss on sale of land       3,500 132,660

Net Income                                $18,850

Explanation:

Data:

Sales                                         $155,000

Sales returns and allowances     (3,500)

Net Sales                                  $151,500

Miscellaneous expense     1,100

Transportation-out           2,500

Advertising expense        6,500

Salaries expense            21,600

Rent expense                   8,500

Utilities expense               1,750

Total expenses            $41,950

Interest expense 450

Loss on sale of land 3,500

Transportation-in 2,950

Purchases 85,000

Purchase returns and allowances 2,500

Merchandise inventory, January 1 12,000

Merchandise inventory, 10,700

December 31