Question

On August 31, 2012, merchandise inventory was $32,684. Supplementary records of merchandising activities for the year ended August 31, 2013, reveal the following itemized costs. Invoice cost of merchandise purchases $ 119,070 Purchase discounts received 2,500 Purchase returns and allowances 5,715 Costs of transportation-in 3,900 3. Prepare a multiple-step income statement that includes separate categories for selling expenses and for general and administrative expenses.

Answer 1

Answer:

Hi, the question you provided is missing the sales amounts.

However, the important principles for this questions are explained below :

A multiple-step income statement shows separately income derived from Primary Activity of the entity (Operating Income / Loss) and income that includes Secondary Activities of the Company (Net Income / Loss).

Operating Expenses used in determination of Operating Income can be further categorized into Selling, General and Administrative Expenses.

Here is what the multiple-step income statement would look like using the data and information available.

Multiple-step income statement for month ended August 31, 2012

Sales Revenue (information missing)                                              $ ? ? ?

Less Cost of Sales :

Opening Merchandise                                                      $0

Add purchases                                         $ 119,070

Add transport expenses                             $3,900

Less Purchase returns and allowances     ($5,715)     $117,255

Net Purchases                                                               $117,255

Less Closing Merchandise                                           ($32,684)   ($84,571)

Gross Profit                                                                                         $ ? ? ?

Operating Income

Discount Received                                                                           $2,500

Net Income / Loss                                                                              $ ? ? ?