Question

QS 5-12 Preparing a multi-step income statement LO P4 Save-the-Earth Co. reports the following income statement accounts for the year ended December 31. Sales discounts $ 790 Office salaries expense 2,400 Rent expense—Office space 1,900 Advertising expense 580 Sales returns and allowances 290 Office supplies expense 580 Cost of goods sold 9,800 Sales 28,000 Insurance expense 1,400 Sales staff salaries 2,900 Required: Prepare a multiple-step income statement for the year ended December 31.

Answer 1

Answer:

Explanation:

Multi step income statement is a more detailed way of reporting profit and loss compared to the single step as it entails the use of series of equation to arrive at the net income.

Workings

      Income Statement for Save - the - Earth for the year Ended Dec. 31

Sales                                                   28,000

Sales discount             790

sales return                  290                 (1080)

and allowance

Net sales                                              26,920

Cost of goods                                        9,800

Gross profit                                            17,120

Expenses

Selling expenses

Staff Salary                  2900

Rent                             1900

Advertising                  580                    

Total Selling expenses                          5380

General admin expenses

Office salary                 2400

Insurance expenses    1400

Office supplies             580                    

Total general admin expenses               4380

Total expenses                                        9,760

Net income                                             7,360