Question

Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single step format. The discussion involves the following 2020 information related to Waterway Company ($000 omitted). Administrative expense Officers' salaries $4,972 Depreciation of office furniture and equipment 4,032 Cost of goods sold 60,642 17,302 Rent revenue Selling expense Delivery expense 2,762 Sales commissions 8,052 Depreciation of sales equipment 6,552 Sales revenue 96,572 Income tax 9,142 Interest expense 1,932 Common shares outstanding for 2020 total 31,576 (000 omitted).

Answer 1

WATERWAY COMPANY
Multiple - step Income Statement
For the Year Ended December, 31, 2020
	$ ( In 000's)	$ ( In 000's)	$ ( In 000's)
Sales Revenues
Sales		96,572.00
Cost of goods sold		60,642.00
Gross Profit			35,930.00
Operating Expenses
Selling Expense
Delivery Expense	2,762.00
Sales Commissions	8,052.00
Depreciation of sales equipment	6,552.00	17,366.00
Administrative/General Expenses
Officers' Salaries	4,972.00
Depreciation of office furniture and equipment	4,032.00	9,004.00
Total Operating Expenses			26,370.00
Income from Operations			9,560.00
Other Income or Expense
Rent Revenue			17,302.00
Other expenses and losses
Interest expense			1,932.00
Income before taxes			24,930.00
Income tax			9,142.00
Net Income			15,788.00
Earnings Per Share ($15,788 / 31,576 shares)			$            0.50

WATERWAY COMPANY
Single Step Income Statement
For the year ended December 31, 2020
	$	$
Revenue:
Net Sales	96,572.00
Rent Revenue	17,302.00
Total Revenue		113,874.00
Less Expenses:
Officers' Salaries	4,972.00
Depreciation	10,584.00
Delivery/Interest Expense	4,694.00
Sales Commissions	8,052.00
Total expenses		28,302.00
Income before taxes		85,572.00
Income Tax		9,142.00
Net Income		$   76,430.00
Earnings per Common Share		$             2.42
($76,430 / 31,576 shares)