Help: Two accountants for the firm of Elwes and Wright are arguing about the mer

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Two accountants for the firm of Elwes 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 2014 information related to P. Bride Company ($000 omitted).

Common shares outstanding for 2014 total 40,660 (000 omitted).

Here are the possible accounts: Accumulated Depreciation-Equipment
Administrative Expenses
Bad Debt Expense
Cost of Goods Sold
Delivery Expense
Depreciation Expense
Dividend Revenue
Entertainment Expense
Equipment
Extraordinary Item—Casualty loss
Extraordinary Item—Gain on Sale of Plant
Extraordinary Item-Loss from Earthquake Damage
Gain on Disposal of Land
Income Tax Expense
Interest Expense
Interest Revenue
Maintenance and Repairs Expense
Miscellaneous Selling Expenses
Mortgage Payable
Office Expense
Other Administrative Expenses
Property Tax Expense
Rent Revenue
Salaries and Wages Expense
Salaries and Wages Payable
Sales Commission
Sales Discounts
Sales Returns and Allowances
Sales Revenue
Selling Expenses
Supplies
Supplies Expenses
Telephone and Internet Expense
Travel Expense

Administrative expense     Officers' salaries $5,433     Depreciation of office furniture and equipment 4,493 Cost of goods sold 61,103 Rent revenue 17,763 Selling expense     Delivery expense 3,223     Sales commissions 8,513     Depreciation of sales equipment 7,013 Sales revenue 97,033 Income tax 9,603 Interest expense 2,393

Explanation / Answer

The single step format uses only one subtraction to arrive at net income.

Net Income = ( Revenues + Gains) - ( Expenses + Losses)

The multiple step income statement involving multiple subtractions segregates the operating revenues and operating expenses from nonoperating revenues and nonoperating expenses and losses.

$ $ Revenues and gains Sales revenue 97,033 Rent revenue 17, 763 Total revenues and gains 114,796 Expenses and losses Cost of goods sold 61,103 Officers' salaries 5,433 Depreciation expense 11,506 Delivery expense 3,223 Sales commission 8,513 Interest expense 2,393 Income tax expense 9,603 Total expenses and losses 101,774 Net income 13,022

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