Question

The following information was drawn from the records of Toner Sales Company Net sales Cost of goods sold Operating expenses Loss on the sale of land Year 1 $ 62,000 (27,900) (9,300) Year 2 $ 62,000 (31,000) (17,360) (11,160) Required: a. Prepare a multistep income statement for each year. (Amounts to be deducted shouk TONER SALES COMPANY Multistep Income Statement For the Years Ended December 31, Year 1 and Year 2 Year 1 Year 2

Answer 1

Multiple Step Income Statement:-

In multiple Step Income Statement Revenue and Expenses categorised as Operating Revenue or Expenses and Non Operating Gains or Losses, and its also shows Gross Profit (Net Sales minus Cost of Goods Sold).

a. Preparing Multiple Step Income Statement for each year:-

TONER SALES COMPANY

Multiple Step Income Statement

For the Year Ended December 31, Year 1 and Year 2

Accounts	Year 1	Year 2
Net Sales	$62,000	$62,000
Less:- Cost of Goods Sold	(27,900)	(31,000)
Gross Profit	$34,100	$31,000
Less:- Operating Expenses	(9,300)	(17,360)
Operating Income	$24,800	$13,640
Non Operating and Others:-
Less:- Loss on sale of land	($0)	(11,160)
Net Income	$24,800	$2,480

Common Size Income Statement:-

It is a Income Statement I which each items is expressed as a percentage of Net Sales or Revenue. Its a Vertical Analysis.

(b) Preparing a Common size Income Statement for each Year:-

TONER SALES COMPANY

Common Size Income Statement

For the Year Ended December 31, Year 1 and Year 2

Accounts	Year 1	%	Year 2	%
Net Sales	$62,000	100%	$62,000	100%
Less:- Cost of Goods Sold	(27,900)	45%	(31,000)	50%
Gross Profit	$34,100	55%	$31,000	50%
Less:- Operating Expenses	(9,300)	15%	(17,360)	28%
Operating Income	$24,800	40%	$13,640	22%
Non Operating and Others:-
Less:- Loss on sale of land	(0)	0%	(11,160)	18%
Net Income	$24,800	40%	$2,480	4%

Working Notes:-

Formulas for Calculations of Percentage For Year 1 and 2:-

Cost of Goods Sold (%)=(Cost of Goods Sold/Net Sales)×100

=($27,900/$62,000)×100

=45%

Gross Profit (%)=(Gross Profit/Net Sales)×100

Operating Expenses (%)=(Operating Expenses/Net Sales)×100

Operating Income (%)=(Operating Income/Net Sales)×100

Non Operating and Others (%)=(Non Operating and Others/Net Sales)×100

Net Income (%)=(Net Income/Net Sales)×100