Question

On March 31, 2018, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture wholesaler, are as follows:Accounts Receivable $165,250Accumulated Depreciation-Building 758,050Administrative Expenses 522,950Building 2,558,950Cash 184,200Common Stock 308,650Cost of Goods Sold 3,884,500Dividends 184,250Interest Expense 9,500Inventory 1,008,800Notes Payable 250,600Office Supplies 20,200Retained Earnings 1,349,550Salaries Payable 7,750Sales 6,243,700Selling Expenses 733,950Store Supplies 94,450A. Prepare a multiple-step income statement for the year ended March 31, 2018. Be sure to complete the statement heading.B. What is a major advantage of the multiple-step income statement over the single-step income statement?

Answer 1

Answer:

March 31, 2018 Multi Step - Income Statement

$ 6.243,700 Sales

$ 6.243,700 Net Sales Revenues

-$ 3.884,500 Cost of goods sold

-$ 3.884,500 Cost of goods sold

$ 2.359,200 Gross PROFIT

-$ 733,950 Selling expenses

-$ 733,950 Operating Expenses

$ 1.625,250 INCOME FROM OPERATIONS

$ 0,000 Other Revenues and Gains:

-$ 9,500 Interest Expenses

-$ 9,500 Other expenses and Loss

$ 1.615,750 NET INCOME AFTER TAXES

$ 0,000 Income Tax Expenses

$ 1.615,750 Net INCOME

Explanation:

In the Multistep income it's possible to segregate the operative expenses and revenues of the non operative, it also shows the gross profit, which is  

the Net Sales Revenues less the Cost of Goods Sold.  

First it's shown the Gross Profit, then substracted the operating expenses  

to arrive at operating income.  

Finally with the non operating movements we have the net Income After Taxes and with the taxes expenses we have the Net Income of the company.  

By the way in the Single Step Income doesn't exist a segregation in the expenses,  

it doesn't break the expenses into cateogories, so all the expenses are listed together.  

It means the financial statement doesn't give much information to the external users about the company operations.