Question

Exercise 4-3 (Static) Income statement format; single step and multiple step [LO4-1, 4-3, 4-5]

The following is a partial trial balance for General Lighting Corporation as of December 31, 2021:

Account Title	Debits	Credits
Sales revenue		2,350,000
Interest revenue		80,000
Loss on sale of investments	22,500
Cost of goods sold	1,200,300
Loss on inventory write-down (obsolescence)	200,000
Selling expense	300,000
General and administrative expense	150,000
Interest expense	90,000

There were 160,000 shares of common stock outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25%.

Required:

1. Prepare a single-step income statement for 2021, including EPS disclosures.

2. Prepare a multiple-step income statement for 2021, including EPS disclosures.

Answer 1

Single-step income statement GENERAL LIGHTING CORPORATION Income Statement For the Year Ended December 31, 2021 Revnues and gains : Sales Revenue $2.350.000 Interest Revenue $ 80.000 Total revenues and gains $2,430,000 Expenses and losses Cost of goods sold $ 1,200,300 Selling expenses $ 300,000 Interest Expense $ 90,000 General and administrative expenses $ 150,000 Loss on sale of Investments $ 22,500 Loss on Inventory Write-down (obsolescence) $ 200.000 Income Tax expenses $ 116,800 Total expenses and losses $2.079,600 Net Income $ 350,400 No of Outstanding common shares 160,000 Earnings per share Net Income 2.19 Working Notes: Income Tax Expense = $2,430,000-($1,200,300-$300,000-$90,000-$150,000-$22,500-$200,000)*25% = $116,800 Earnings per Share Net Income = ($350,400/160,000) = $2.19

$2,350,000 $1,200,300 $1,149,700 Multiple-step income statement GENERAL LIGHTING CORPORATION Income Statement For the Year Ended December 31,2021 Sales revenue Cost of Goods sold Gross Profit Operating expenses Selling expenses $ 300,000 General and administrative expenses $ 150,000 Loss on Inventory Write-down (obsolescence) Total Operating Expenses Operating Income Other Income (Expense) Interest revenue $ 80,000 Interest expenses $ (90.000) Loss on sale of investments $ (22.500) Total other income expense), net Income before taxes Income tax expense Net Income No of outstanding common shares Earnings per share Net Income $ 650.000 $ 499,700 $ $ $ $ (32,500) 467,200 116.800 350,400 160,000 $ 2.19