Question

Oriole Corporation reported the following for 2020: net sales $1,235,200, cost of goods sold $721,800, selling and administrative expenses $338,600, and an unrealized holding gain on available-for-sale debt securities $15,700.
Required:
Prepare a statement of comprehensive income, using (a) the one statement format, and (b) the two statement format. (Ignore income taxes and EPS).

Answer 1

Answer:

In both formats, net income is equal to $190,500

Explanation:

(a) the one statement format

The single step statement format is an income statement format that shows only one category of income and only one category of expenses. From the question, this can be prepared as follow:

Income = Net sales +  unrealized holding gain on available-for-sale debt securities = $1,235,200 + $15,700 = $1,250,900

Expenses = Cost of goods sold + Selling and administrative expenses = $721,800 + $338,600 = $1,060,400

Oriole Corporation

Statement of comprehensive income

Details                                           Amount ($)

Income                                          1,250,900

Expenses                                      1,060,400

Net income                                     190,500

(b) the two statement format.

The two step statement format is an income statement format that uses two category to separate income accounts based on their function by showing gross profit and other income separately to arrive operating income, and also show selling and administrative expenses on its own. This can be prepared as follows:

Oriole Corporation

Statement of comprehensive income

Details                                                        Amount ($)

Net sales                                                    1,235,200

Cost of goods sold                                    (721,800)

Gross profit                                                  513,400

Other income:

Available-for-sale debt securities gain       15,700

Operating income                                       529,100

Expenses:

Selling and administrative expenses       (338,600)

Net income                                                 190,500