Question

Explain where each of the following items would appear on a multiple-step income statement.

Answer 1

Answer:

a. Gain on disposal of plant assets will appear under Other Revenues and Gains.

b. Cost of goods sold will still appear under Cost of Goods Sold.

c. Depreciation expense will appear under Operating Expense.

d. Sales returns and allowances will appear under Sales Revenue.

Explanation:

A multiple-step income statement is an income statement in which the net income reported on the bottom line is calculated using multiple subtractions.

Each of the following items would appear on a multiple-step income statement as explained below.

a. Gain on disposal of plant assets

This will appear under Other Revenues and Gains.

Other Revenues and Gains are revenues from auxiliary operations and gains unrelated to the company's operations, which are reported in the non-operating activities section of the income statement. The following are some of them: Interest from receivable, marketable securities, Gains on Disposal of Plant Assets, etc.

b. Cost of goods sold

This will still appear under Cost of Goods Sold.

Cost of Goods Sold are the direct costs of manufacturing the commodities that a business sells. This figure covers the direct cost of the materials and labor that went into making the good. It does not include indirect costs like distribution and sales force expenditures.

c. Depreciation expense

This will appear under Operating Expense.

Operating Expense is a cost that a company incurs as part of its routine operations. Examples of this include rent, marketing, payroll, insurance, monies allocated for research and development, depreciation expense, and among others.

d. Sales returns and allowances

These will appear under Sales Revenue.

This is the amount of money a corporation makes through selling things or providing services minus sales returns allowances and sales discounts.