Two accountants for the firm of Allen and Wright are arguing about the merits of

Question

Two accountants for the firm of Allen 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 2012 information related to Webster Company ($000 omitted).

Administrative expense
Officer's salaries $ 5,320
Depreciation of office furniture and equipment 4,460
Cost of goods sold 60,950
Rental revenue 18,060
Selling expense
Transportation-out 2,690
Sales commissions 7,980
Depreciation of sales equipment 6,480
Sales 97,620
Income tax 9,070
Interest expense 1,860

(a) Prepare an income statement for the year 2012 using the multiple-step form. Common shares outstanding for 2012 total 40,550 (000 omitted)

Explanation / Answer

Sales 97,620
Cost of Goods Sold 60,950
Gross Profit 36,670

Operating Expenses
Selling Expenses

Sales Commissions 7,980
Transportation-out 2,690
Depreciation of sales equipment 6,480

Administrative Expenses
Officer's salaries 5,320
Depreciation of office furniture and equipment 4,460

Total Operating Expenses 26930
Operating income 9740

Non- operating or Other
Rental Revenue 18,060
Interest Expense (1,860)
Total non-operating 16200

Income before taxes 25940
Income tax 9070

Net Income 16870

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