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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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OBJECTIVE 6 Exercise 1-46 Income Statement

ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019.

Chapter 1, Problem 46E, OBJECTIVE 6 Exercise 1-46 Income Statement ERS Inc. maintains and repairs office equipment. ERS had

Required:

1. Prepare a single-step income statement for ERS for 2019.

2. CONCEPTUAL CONNECTION Compute net profit margin for ERS. If ERS is able to increase its service revenue by $100,000, what should be the effect on future income?

3. CONCEPTUAL CONNECTION Assume that ERS net profit margin was 8.5% for 2018. As an investor, what conclusions might you draw about ERS’ future profitability?

To determine

Concept Introduction:

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.

Requirement-1:

To Prepare:

The Single step income statement.

Explanation

There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.

The Single step income statement is prepared as follows:

    ERS Inc.
    Single Step Income Statement
    For the month of January 2019
    Revenue:
    Service revenue $ 933,800
    Total Revenue$ 933,800
    Expenses:
    Cost of Goods Sold
    Utilities Expense $ 26,100
To determine

Concept Introduction:

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.

Requirement-2:

To Prepare:

The Net profit margin and effect on net income if sales revenue increases by $100,000.

To determine

Concept Introduction:

Income Statement:

Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.

There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.

Requirement-3:

To Discuss:

The future profitability of the company.

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