Question

On March 31, 2018, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture wholesaler, are as follows:

Accounts Receivable		$ 170,000
Accumulated Depreciation-Building		750,000
Administrative Expenses		435,000
Building		3,500,000
Cash		80,000
Common Stock		300,000
Cost of Goods Sold		5,500,000
Dividends		175,000
Interest Expense		15,000
Inventory		980,000
Notes Payable		250,000
Office Supplies		20,000
Retained Earnings		1,987,000
Salaries Payable		8,000
Sales		8,245,000
Selling Expenses		575,000
Store Supplies		90,000
A.		Prepare a multiple-step income statement for the year ended March 31, 2018. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign.
B.		What is a major advantage of the multiple-step income statement over the single-step income statement?
Labels
For the Year Ended March 31, 2018
March 31, 2018
Operating expenses
Other revenue and expense
Amount Descriptions
Gross profit
Income from operations
Net income
Net loss
Total assets
Total liabilities
Total operating expenses
Total stockholders’ equity

A. Prepare a multiple-step income statement for the year ended March 31, 2018. Be sure to complete the statement heading. Refer to the information given in the exercise and to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign.

Royal Furnishings Company

Income Statement

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B. What is a major advantage of the multiple-step income statement over the single-step income statement?

The multiple-step income statement clearly presents the value of total revenues.

The multiple-step income statement clearly presents the value of total expenses.

The multiple-step income statement shows the relationship of gross profit to sales.

The multiple-step income statement is less complex to prepare.

Answer 1

1)

Royal Furnishings Company Income Statement
sales	8245000
less:cost of goods sold	(5500000)
Gross margin	2745000
Less:selling and administrative expense
Administrative Expenses	(435000)
Selling Expenses	(575000)
Total selling and administrative expense	(1010000)
Operating income	1735000
other Income /(expense)
Interest expense	(15000)
Net Income	1720000

2)correct option is "C"

The multiple-step income statement shows the relationship of gross profit to sales.