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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Simple Income Statement The following are selected items derived from Dibb Company’s adjusted trial balance on December 31, 2019:

Chapter 5, Problem 1E, Simple Income Statement The following are selected items derived from Dibb Companys adjusted trial

Twelve thousand shares of common stock were outstanding the entire year.

Required:

Assuming a 30% income tax rate on all items of income, prepare Dibb’s 2019 income statement using (1) a multiple-step format and (2) a single-step format.

To determine

Prepare the income statement of Company D for the year 2019 using the following methods:

  1. 1. A multi-step format and
  2. 2. A single-step format.
Explanation

Multi-step income statement: The income statement represented in multi-steps with several subtotals, to report the income from principal operations, and separate the other expenses and revenues which affect net income, is referred to as multi-step income statement.

Single-step income statement: This statement displays the total revenues as one line item from which the total expenses including cost of goods sold is subtracted to arrive at the net profit /net loss for the period.

  1. 1. Prepare a multi-step income statement of Company D for the year 2019:
Company D
Income Statement (Multiple-Step)
For Year Ended December 31, 2019
ParticularsAmount ($)
Sales (net)$198,000
Less: Cost of goods sold 130,000
    Gross profit $68,000
Less: Operating expenses45,000
Operating income $23,000
Other items: 
Less: Loss on sale of land 5,000
Income before income tax$18,000
Income tax expense 5,400
Net income (a)$12,600
Number of common shares (b)12,000 shares
Earnings per Common Share (ab) $1

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