Question

wo 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 Nash Company ($000 omitted). Administrative expense     Officers' salaries $5,207     Depreciation of office furniture and equipment 4,267 Cost of goods sold 60,877 Rent revenue 17,537 Selling expense     Delivery expense 2,997     Sales commissions 8,287     Depreciation of sales equipment 6,787 Sales revenue 96,807 Income tax 9,377 Interest expense 2,167 Common shares outstanding for 2020 total 28,756 (000 omitted).

Prepare an income statement for the year 2020 using the multiple-step form. Prepare an income statement for the year 2020 using the single-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

Solution:

1) Multiple Step Income statement for year 2020:

Multiple Step Income statement
For the Year 2020
( In thousands, except earnings per share)
Sales Revenue			$   96,807
(less):Cost of goods sold			$ (60,877)
Gross Profit			$   35,930
Operating expenses:
Selling expenses
Delivery expense	$        2,997
Sales Commissions	$        8,287
Depreciation of sales equipment	$        6,787
Total Selling Expense		$ 18,071
General and administrative expenses
Officers` salaries	$        5,207
Depreciation of office furniture and equipment	$        4,267
Total General and administrative expenses		$    9,474
Total operating expenses			$ (27,545)
Operating Income ( Gross profit - Operating Expense)			$      8,385
Other income
Rent revenue			$   17,537
			$   25,922
Other Expense
Interest expense			$   (2,167)
Income before income tax			$   23,755
(less): income tax			$   (9,377)
Net income			$   14,378
Earnings per Common Stock ( $ 14,378 / 28,756 Shares )			$        0.50

2) Single Step Income statement for year 2020:

Single Step Income statement
For the Year 2020
( In thousands, except earnings per share)
Revenue
Sales Revenue	$            96,807
Rent Revenue	$            17,537
Total Revenue (A)		$   114,344
Operating Expenses / Expenses
Cost of goods sold	$            60,877
Delivery Expenses	$              2,997
Sales Commissions	$              8,287
Depreciation on sales equipment	$              6,787
Interest Expense	$              2,167
Income tax	$              9,377
Officers` Salaries	$              5,207
Depreciation of office furniture and equipment	$              4,267
Total Expenses (B)		$     99,966
Net Income (A-B)		$     14,378
Common Shares Outstanding		28,756
Earnings Per Share ( $ 14,378 / 28,756 Shares)		$          0.50