The Following Data Were Taken from the Records of Lilo

question 97

Essay

The following data were taken from the records of Lilo Corporation for the year ended December 31, 2014 before any adjustment for bad debt expense: $\begin{array}{lr}\text { Sales of merchandise for cash } & \$ 150,000 \\\text { Sales of merchandise on credit } & 800,000 \\\text { Sales returns and allowances } & 10,000 \\\text { Sales salaries expense } & 80,000 \\\text { Cost of sales } & 610,000 \\\text { Administrative expenses } & 90,000\end{array}$ The following items have not been included in above amounts:
Estimated bad debt expense is 1% of credit sales.
The income tax rate is 35%.
10,000 of shares of common stock are outstanding.
Required:
A. Calculate the bad debt expense.
B. Prepare a multiple-step income statement (including gross profit, income before income taxes, and earnings per share).

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Definitions:

Bonuses

Monetary rewards offered by companies for exceptional performance as incentives to further increase productivity.

Theory X Manager

A management style based on the assumption that employees are inherently lazy and will avoid work if they can, necessitating a controlling and directive leadership style.