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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Multiple-step income statement

On October 31, 2016, the balances of the accounts appearing in the ledger of Prestige Furnishings Company, a furniture wholesaler, are as follows:

Chapter 6, Problem 6.23EX, Multiple-step income statement On October 31, 2016, the balances of the accounts appearing in the

a. Prepare a multiple-step income statement for the year ended October 31, 2016.

b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.

a.

To determine

Multi step income statement: A multiple step income statement refers to the income statement that shows the operating and non-operating activities of the business under separate head. In different steps of the multi-step income statement, principal operating activities are reported that starts from the record of sales revenue with all contra sales revenue account like sales returns, allowances and sales discounts.

To Prepare: The multi-step income statement of Company P for the year ended October 31, 2016.

Explanation

Prepare the income statement for Company P.

Company P

Income Statement

For the Year ended October 31, 2016

Particulars Amount($) Amount($)
Sales revenue   6,410,000
Less: Cost of goods sold (3,800,000)
Gross profit 2,610,000
Opera...

b.

To determine

Multi step income statement: A multiple step income statement refers to the income statement that shows the operating and non-operating activities of the business under separate head. In different steps of the multi-step income statement, principal operating activities are reported that starts from the record of sales revenue with all contra sales revenue account like sales returns, allowances and sales discounts.

Single-step income statement: It is an income statement format in which a single subtotal of all revenue items are listed in one column and a single subtotal of all expense items including cost of goods sold are listed in another column. Thus, the subtotal of all expense items is deducted from the subtotal of all revenue items to arrive at the net income at the bottom of the statement.

To Describe: The major advantages and disadvantages of the multi-step and single-step forms of income statements.

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