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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

Identify the errors in the following income statement:

Chapter 6, Problem 6.24EX, Multiple-step income statement Identify the errors in the following income statement:

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 Identify: The errors in the income statement of Company C.

Explanation
  • The deduction of cost of goods sold from the sales revenue results gross profit rather income from operations.
  • The deduction of total expenses from the gross profit results income from operations rather operating income.
  • The interest revenue should come under the head of ‘other revenue’ and added to income from operations which results net income.
  • The final amount is titled as net income not gross profit on the income statement.

Prepare the correct multi-step income statement of Company C.

Company C
Income Statement
Year Ended August 31, 2016
Particulars Amount ($) Amount ($)
Sales Revenue ...

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