Chapter 1, Problem 48E

Exercise 1-48 Income Statement

The following information is available for Wright Auto Supply at December 31, 2019.

Required:

1. Prepare a single-step income statement for the year ended December 31, 2019.

2. Prepare a multiple-step income statement for the year ended December 31, 2,019.

3. CONCEPTUAL CONNECTION Comment on the differences between the single-step and the multiple-step income statements.

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 for Wright Auto Supply for the year ended Dec. 31, 2019.

Answer to Problem 48E

The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is as follows:

Wright Auto Supply
Single Step Income Statement
For the year ended Dec. 31, 2019
Revenues:
Sales Revenue		$ 585,600
Total Revenues
Less: Expenses:
Cost of goods sold	$ 292,000
Depreciation expense	$ 31,250
Interest expense	$ 2,400
Income tax expense	$ 32,520
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Expenses		$ 509,720
Net Income		$ 75,880

Explanation of Solution

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 for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:

Wright Auto Supply
Single Step Income Statement
For the year ended Dec. 31, 2019
Revenues:
Sales Revenue		$ 585,600
Total Revenues (A)
Less: Expenses:
Cost of goods sold	$ 292,000
Depreciation expense	$ 31,250
Interest expense	$ 2,400
Income tax expense	$ 32,520
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Expenses (B)		$ 509,720
Net Income (A-B)		$ 75,880

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 multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019.

Answer to Problem 48E

The multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is as follows:

Wright Auto Supply
Multi Step Income Statement
For the year ended Dec. 31, 2019
Sales Revenue	$ 585,600
Less: Cost of goods sold	$ 292,000
Gross Profit		$ 293,600
Less: Selling and Administrative expenses:
Depreciation expense	$ 31,250
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Selling and Administrative expenses:		$ 182,800
Operating income		$ 110,800
Less: Interest expense		$ 2,400
Income before tax		$ 108,400
Less: Income tax expense		$ 32,520
Net income		$ 75,880

Explanation of Solution

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 multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:

Wright Auto Supply
Multi Step Income Statement
For the year ended Dec. 31, 2019
Sales Revenue	$ 585,600
Less: Cost of goods sold	$ 292,000
Gross Profit		$ 293,600
Less: Selling and Administrative expenses:
Depreciation expense	$ 31,250
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Selling and Administrative expenses:		$ 182,800
Operating income		$ 110,800
Less: Interest expense		$ 2,400
Income before tax		$ 108,400
Less: Income tax expense		$ 32,520
Net income		$ 75,880

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 Indicate:

The difference between the multi step and single step Income Statements.

Answer to Problem 48E

The difference between the multi step and single step Income Statements is explained as follows:

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.

Explanation of Solution

The difference between the multi step and single step Income Statements is explained as follows:

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 multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:

Wright Auto Supply
Multi Step Income Statement
For the year ended Dec. 31, 2019
Sales Revenue	$ 585,600
Less: Cost of goods sold	$ 292,000
Gross Profit		$ 293,600
Less: Selling and Administrative expenses:
Depreciation expense	$ 31,250
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Selling and Administrative expenses:		$ 182,800
Operating income		$ 110,800
Less: Interest expense		$ 2,400
Income before tax		$ 108,400
Less: Income tax expense		$ 32,520
Net income		$ 75,880

The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:

Wright Auto Supply
Single Step Income Statement
For the year ended Dec. 31, 2019
Revenues:
Sales Revenue		$ 585,600
Total Revenues (A)
Less: Expenses:
Cost of goods sold	$ 292,000
Depreciation expense	$ 31,250
Interest expense	$ 2,400
Income tax expense	$ 32,520
Rent Expense	$ 21,000
Salaries expenses (Admn.)	$ 33,800
Wages expense (Sales)	$ 96,750
Total Expenses (B)		$ 509,720
Net Income (A-B)		$ 75,880