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

Question

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 2017 information related to Wildhorse Company ($000 omitted).

Administrative Expense

Officers' salaries.                                                              $ 4,990
Depreciation of office furniture and equipment                $4,050

Cost of goods sold.                                                           60,660
Rent Revenue.                                                                    17,320
Selling expense.                   
    Delivery expense.                                                            2,780
    Sales Commissions.                                                         8070
    Depreciation of sales equipment.                                    6,570

Sales Revenue.                                                                   96,590
Income tax.                                                                          9,160
Interest expense.                                                                  1,950

Common shares outstanding for 2017 total 40,550 (000 omitted).

a. Prepare an incomestatement for the year 2017 using the multiple-step form

Explanation / Answer

Income Statement using Multiple Step Form

iv. Operating Expenses(9040+17420)

  Officers' salaries = 4990

  Depreciation of office furniture and equipment = 4050

  Delivery expense = 2780

  Sales Commissions = 8070

  Depreciation of sales equipment = 6570

vi. Other Incomes and Expenses

Particulars Amount i. Sales 96590 ii. Less : Cost of goods sold (60660) iii. Gross Profit (i-ii) 35930

iv. Operating Expenses(9040+17420)

• Administrative Expense (4990+4050) = 9040

  Officers' salaries = 4990

  Depreciation of office furniture and equipment = 4050

• Selling expense (2780+8070+6570)= 17420

  Delivery expense = 2780

  Sales Commissions = 8070

  Depreciation of sales equipment = 6570

26460 v. Operating income (iii-iv) 9470

vi. Other Incomes and Expenses

• Rent Revenue = 17320
• Less : Interest expense = (1950)

15370 vii Net Income (v+vi) 24840

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