# Multiple-step income statement Identify the errors in the following income statement: Curbstone Company Income Statement For the Year Ended August 31, 2019 Sales \$8,595,000 Cost of merchandise sold 6,110,000 Income from operations \$2,485,000 Expenses: Selling expenses \$800,000 Administrative expenses 575,000 Delivery expenses 425,000 Total expenses 1,800,000 \$ 685,000 Other expense: interest revenue 45.000 Gross profit S 640.000

### Accounting

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

### Accounting

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

#### Solutions

Chapter
Section
Chapter 6, Problem 6.26EX
Textbook Problem

## Multiple-step income statementIdentify the errors in the following income statement: Curbstone Company Income Statement For the Year Ended August 31, 2019 Sales \$8,595,000 Cost of merchandise sold 6,110,000 Income from operations \$2,485,000 Expenses: Selling expenses \$800,000 Administrative expenses 575,000 Delivery expenses 425,000 Total expenses 1,800,000 \$ 685,000 Other expense: interest revenue 45.000 Gross profit S 640.000

Expert Solution
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 of Solution

• The deduction of cost of goods sold from the sales revenue results in gross profit rather than income from operations.
• The deduction of total expenses from the gross profit results in income from operations rather than operating income.
• The interest revenue should come under the head of ‘other revenue’ and added to income from operations which results in 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, 2019 Particulars Amount (\$) Amount (\$) Sales Revenue 8,595,000

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