Question

Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2017 information related to Cheyenne Company ($000 omitted). Administrative expense Officers' salaries $5,348 Depreciation of office furniture and equipment 4,408 Cost of goods sold 61,018 Rent revenue 17,678 Selling expense Delivery expense 3,138 Sales commissions 8,428 Depreciation of sales equipment 6,928 Sales revenue 96,948 Income tax 9,518 Interest expense 2,308 Common shares outstanding for 2017 total 40,550 (000 omitted). (a) Prepare income statement for the year 2017 using the mutiple-step form. Common shares outstanding for 2017 total 40,550 (000 omitted).
(b) Prepare an income statement for the year 2017 using the single-step form.

Answer 1

Answer:

MULTI-STEP

Sales Revenue  96,948.00

Sales commissions (8,428.00)

Net Sales          88,520.00

COGS                 (61,018.00)

Gross Profit          27,502.00

Depreciation          (11,336.00)

Delivery Expense  (3,138.00)

Salaries expense  (5,348.00)

Operating Income   7,680.00

Rent revenue            17,678.00

Interest expense  (2,308.00)

Non-Operating         15,370.00

Earning Before Taxes  23,050.00  

Income Tax  (9,518.00)

Net Income  13,532.00  

Shares 40,550

EPS  0.33  

ONE-STEP

Sales Revenue   96,948.00

Sales commissiones (8,428.00)  

Net Sales            88,520.00

COGS                    (61,018.00)  

Gross Profit            27,502.00

Rent Revenue    17,678.00

Depreciation           (11,336.00)

Delivery Expense     (3,138.00)

Salaries expense    (5,348.00)

Interest expense   (2,308.00)  

EBT                     23,050.00  

Income Tax             (9,518.00)  

Net Income            13,532.00  

Explanation:

The multi-steps calcualte the operating income and the non-operating income (from other activities and interest which aren't directly linked to the main activity of the company) While the one step just calcualte directly through earnings before taxes after solving gross profit.

Answer 2

Answer:

INCOME STATEMENT ( multi-step form)

Revenues                                                                 $96,948

Cost of sales                                                           - $61,018

gross profit                                                               $35,930

Operating incomes                                                  $17,678

      -Rent revenue                      $17,678

Gross operating incomes                                        $53,608

Operating Expenses                                               - $28250                

Admin Expense                                           $9756

   - officers' salary                       $5,348

   - Depreciation                         $4,408

Selling expenses                                        $18,494

  -Delivery expense                   $3,138

  -sales commission                   $8,428

  -Depreciation                          $6,928

Operating income                                                    $25358

Non-Operating expense                                         - $2,308

   -Interest expense                  $2,308

profit before tax                                                         $23050

Tax expense                                                             - $9,518

Net income                                                                 $13,532

b) Income statement ( using single-step form)

REVENUES AND GAINS                                        

   -Revenues                           $96,948

   - Rent revenue                    $17678

Total Revenue and Gains                                         $114,626

EXPENSES AND LOSSES

cost of sales                           $61,018

officers' salary                        $5,348

Depreciation office equip     $4,408

Delivery expense                  $3,138

sales commission                 $8,428

Depreciation sales equip    $6,928

Interest expense                 $2,308

Tax expense                        $9,518

Total Expenses and Losses                                        -$101,094

Net Income                                                                     $13532

 

Explanation: