Shown below is an income statement prepared by a poorly trained bookkeeper. Assume an income tax...

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Question

Shown below is an income statement prepared by a poorly trained bookkeeper. Assume an income tax...

Shown below is an income statement prepared by a poorly trained bookkeeper.

Assume an income tax rate of 30% on all items. Ignore EPS.

ABC Company Income Statement December 31, 20x1

Sales Revenue	$1,192,375
Investment Revenue	9,250
Cost of goods sold	(340,375)
Selling + Administrative	(563,250)
Interest expenses	(13,000)
Loss on Building (Fire Damage)	(80,000)
Loss on disposal of business segment	(32,500)

NI	120,750

Prepare a multiple-step income statement in good form. Then answer the questions pertaining to the statement.

XYZ, Inc
Income Statement
December 31, 20x1
Sales Revenue
Cost of Goods Sold
Gross Profit/Margin

Selling and Administrative Expenses
Income from Operations

Other Revenue:
Investment Revenue
Total Other Revenue
Other Expenses:
Interest expense
Loss on building (Fire Damage)
Total Other Expenses
Income from Continuing Operations before Tax
Income Taxes
Income from Continuing Operations
Discontinued Operations:
Loss on Disposal of Business Segment (net of tax of $12,000)
NI

Question 19 options:

	What is Total Expenses?
	What is Gross Profit/Margin?
	What is Total Revenue?
123456789	What is the amount reported for “Discontinued Operations” and does the presentation differ among the single and multi-step format?
	What is the amount of “Net Income” and does it differ among the single and multi-step format?

1.	$836,625
2.	$852,000
3.	$1,201,625
4.	It is not displayed.
5.	Loss of $22,750 and yes, it differs.
6.	Loss of $22,750 and no it does not differ.
7.	$120,750 and yes, it differs.
8.	$120,750 and no it does not differ.
9.	Cannot be determined

business accounting

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Answer 1

Answer #1

ABC Company
Income Statement
Particulars	Amount	Amount
Revenue	1192375
Investment income	9250
Total revenue		1201625
Less: Expenses
Cost of goods sold	340375
Selling & admin expenses	563250
Interest expenses	13000
Loss on building (fire)	80000
Total expenses		996625
Profit from continuing operations		205000
Loss on disposal of business segment		-32500
Net income		172500

1. Total expenses= 996625+32500= $109125


2. Gross Margin= Gross Profit/Net sales
Gross profit= Revenue-COGS= 1192375-340375= $852000
Net revenue= 1192375
Gross margin= 852000/1192375= 71.45%

3. Total revenue= Revenue+investment income= $1201625

4. The amount of net income is $ 172500.
It does not differ with preparation of single or multi step income statement
It is only the format of presenting the income statement

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Answer 2

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