Question

Exercise 4-05 a-b 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 Nash Company ($000 omitted). $5,207 4,267 60,877 17,537 Administrative expense Officers' salaries Depreciation of office furniture and equipment Cost of goods sold Rent revenue Selling expense Delivery expense Sales commissions Depreciation of sales equipment Sales revenue Income tax Interest expense 2,997 8,287 6,787 96,807 9,377 2,167 Common shares outstanding for 2020 total 28,756 (000 omitted).

Answer 1

NASH COMPANY
Multiple - step Income Statement
For the Year Ended December, 31, 2020
	$	$	$
Sales Revenues
Sales		96,807.00
Cost of goods sold		60,877.00
Gross Profit			35,930.00
Operating Expenses
Selling Expense
Delivery Expense	2,997.00
Sales Commissions	8,287.00
Depreciation of sales equipment	6,787.00	18,071.00
Administrative/General Expenses
Officers' Salaries	5,207.00
Depreciation of office furniture and equipment	4,267.00	9,474.00
Total Operating Expenses			27,545.00
Income from Operations			8,385.00
Other Income or Expense
Rent Revenue			17,537.00
Other expenses and losses
Interest expense			2,167.00
Income before taxes			23,755.00
Income tax			9,377.00
Net Income			14,378.00
Earnings Per Share ($14,738 / 28,756 shares)			$          0.50

NASH COMPANY
Single Step Income Statement
For the year ended December 31, 2020
	$	$
Revenue:
Net Sales	96,807.00
Rent Revenue	17,537.00
Total Revenue		114,344.00
Less Expenses:
Officers' Salaries	5,207.00
Depreciation	11,054.00
Delivery/Interest Expense	5,164.00
Sales Commissions	8,287.00
Total expenses		29,712.00
Income before taxes		84,632.00
Income Tax		9,377.00
Net Income		$   75,255.00
Earnings per Common Share		$             2.62
($75,225 / 28,756 shares)