Two accountants for the firm are arguing about the merits of presenting an incom

Question

Two accountants for the firm are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2012 information related to Jobs Company ($000 omitted).

Administrative expenses

Officers' salaries $4,920
Depreciation of office furniture and equipment 3,980
Cost of goods sold 63,750
Rent revenue 17,320
Selling expenses
Transportation-out 2,680
Sales commissions 7,890
Depreciation of sales equipment 6,460
Sales 96,600
Income tax 7,850
Interest expense 1,680

Instructions:
(a) Prepare an income statement for the year 2012 using the multiple-step form. Common shares
outstanding for 2012 total 40,225 (000 omitted).

JOBS COMPANY
Multi-Step Income Statement
For the Year Ended December 31, 2012
(In thousands, except earnings per share)

Sales Revenue $96,600
Cost of goods sold 63,750
Gross Profit 32,850

Operating Expenses

Selling Expenses
Transportation-out $2,680
Sales Commissions 7,890
Depreciation of sales equipment 6,460 $17,030
Administrative Expenses
Officer's salaries 4,920
Depreciation of office furniture and equipment 3,980 8,900 25,930
Income from operations 6,920

Other Revenues and Gains

Rent Revenue 17,320
Total 24,240

Other Expenses and Losses

Interest expense 1,680

Income before taxes 22,560

Income tax 7,850
Net income 30,410

Earnings per common share $0.76

(b) Prepare an income statement for the year 2012 using the single-step form. Common shares
outstanding for 2012 total 40,225 (000 omitted).

JOBS COMPANY
Single-Step Income Statement
For the Year Ended December 31, 2012
(In thousands, except earnings per share)

Revenues

Net sales $96,600

Rent Revenue 17,320
Total revenues 113,920

Expenses

Cost of goods sold $63,750
Seling Expenses 17,030
Administrative expenses 8,900
Interest Expense 1,680
Total expenses $91,360

Income before taxes 22,560
Income taxes 7,850
Net income $14,710

Earnings per share (net income / common share outstanding) $0.37

(c) Which one do you prefer? Discuss.
Single-step:




Multiple-step:

Explanation / Answer

A. Look good but there is one mistake. At the end you need to subtract the income taxes to give you 22560-7850= $14,710, as income taxes is an expense. B. Looks good, although it is a single step I.S., you should still list out the admin. and selling expenses under "expenses." Side Note: When doing these comparative I.S. problems, if you do not get the same income, you made a mistake.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.