Multiple-Step Income Statement On March 31, 2018, the balances of the accounts a
ID: 2516876 • Letter: M
Question
Multiple-Step Income Statement
On March 31, 2018, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture wholesaler, are as follows:
a. Prepare a multiple-step income statement for the year ended March 31, 2018.
b. What is a major advantage of the multiple-step income statement over the single-step income statement?
Accounts Receivable $170,000 Inventory 987,550 Accumulated Depreciation—Building 737,500 Notes Payable 305,250 Administrative Expenses 520,750 Office Supplies 20,700 Building 2,515,100 Retained Earnings 1,278,950 Cash 169,050 Salaries Payable 7,950 Common Stock 314,050 Sales 6,187,800 Cost of Goods Sold 3,714,250 Selling Expenses 689,250 Dividends 171,850 Store Supplies 91,600 Interest Expense 9,600Explanation / Answer
Solution a:
Solution b:
A multiple-step income statement identify the company's gross profit, which is the difference of sales revenue and cost of goods sold, and operating profit, which is the difference of gross profit and operating expenses. Investors and financial analysts generally use the data from multiple-step income statements to determine a company's overall health, such as its gross margin and profit margin.
Therefore the major advantage of multiple step income statement over single step income statement is that The multiple-step income statement shows the relationship of gross profit to sales.
Royal Furnishings Company Income statement For the year ended March 31, 2018 Particulars Details Amount Sales $6,187,800.00 Cost of goods sold $3,714,250.00 Gross Profit $2,473,550.00 Operating Expenses: Administrative Expenses $520,750.00 Selling Expenses $689,250.00 Total operating expenses $1,210,000.00 Earning before interest and Taxes $1,263,550.00 Interest Expense $9,600.00 Net Income $1,253,950.00Related Questions
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