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Multiple-step income statement On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows: Accumulated Depreciation—Building $300,000 Administrative Expenses 216,000 Building 1,000,00 Cash 70,000 Cost of Merchandise Sold 1,520,000 Interest Expense 4,000 Kathy Melman, Capital 634,800 Kathy Melman, Drawing 70,000 Merchandise Inventory $ 392,000 Notes Payable 100,000 Office Supplies 8,000 Salaries Payable 3,200 Sales 2,564,000 Selling Expenses 286,000 Store Supplies 36,000 a. Prepare a multiple-step income statement for the year ended March 31, 2019. b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 6, Problem 6.25EX
Textbook Problem

Multiple-step income statement

On March 31, 2019, the balances of the accounts appearing in the ledger of Racine

Furnishings Company, a furniture wholesaler, are as follows:

Accumulated Depreciation—Building $300,000
Administrative Expenses 216,000
Building 1,000,00
Cash 70,000
Cost of Merchandise Sold 1,520,000
Interest Expense 4,000
Kathy Melman, Capital 634,800
Kathy Melman, Drawing 70,000
Merchandise Inventory $ 392,000
Notes Payable 100,000
Office Supplies 8,000
Salaries Payable 3,200
Sales 2,564,000
Selling Expenses 286,000
Store Supplies 36,000
  1. a. Prepare a multiple-step income statement for the year ended March 31, 2019.
  2. b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.

Expert Solution

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 R for the year ended March 31, 2019.

Explanation of Solution

Prepare the income statement for Company R.

Company R

Income Statement

For the Year ended March 31, 2019

Particulars Amount($) Amount($)
Sales revenue   2,564,000
Less: Cost of goods sold (1,520,000)
Gross profit 1,044,000
Expert Solution

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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Chapter 6 Solutions

Accounting
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