Question

Preparing a Single-Step and a Multiple-Step Income Statement The following selected items are taken from the adjusted trial balance of Amick Corp. at December 31, 2020. Sales revenue $950,000 Cost of goods sold 575,000 Dividends received on investment in stocks 6,500 Interest expense 4,200 Loss on sale of investments 48,000 Promotion expense 15,000 Shipping expense 25,000 Depreciation (50% selling, 50% general and administrative) 20,000 Salaries (general and administrative) 80,000 Other general and administrative expenses 23,000 Salaries (selling) 85,300 Interest revenue 2,500 Income tax rate 25% Common stock 20,000 shares a. Prepare a single-step income statement (including earnings per share). Include income taxes in its own section. b. Prepare a multiple-step income statement (including earnings per share). • Enter revenues and gains and expenses and losses in the order of the largest dollar amount to the smallest dollar amount. Do not use negative signs with any of your answers. • Round the per share amount to two decimal places. Single-step Multiple-step

Answer 1

Single Step Income Statement:-

In Single step Income Statement Items are categorised into Revenues and Expenses. It is easy to understand.

Multiple Step Income Statement:- In this financial statement items are categorised into Gross Profit, Selling Expense, General and Administrative Expenses and Non Operating and Others. Gross Profit means Sales Revenue minus Cost of Goods Sold. It is easy to compare and understand.

a.Preparing Single Income Statement:-

Amick Corp.

Single Income Statement

For the Year Ended December 31,2020

Accounts	Amount	Amount
Total Revenues and Gains:-
Sales Revenue	$950,000
Dividends Received on investment	6,500
Interest Revenue	2,500
Total Revenues and Gains		$959,000
Less:-Expenses:-
Cost of Goods Sold	$575,000
Interest Expense	4,200
Loss on sale of investments	48,000
Promotion Expense	15,000
Shipping Expense	25,000
Depreciation Expense	20,000
Salaries Expense	80,000
Other General and Administrative Expenses	23,000
Salaries (Selling)	85,300
Total Expenses		($875,500)
Income before Taxes		$83,500
Less:- Income Tax Expense (25%)		(20,875)
Net Income		$62,625
EPS		$3.13

b. Preparing Multiple step Income Statement:-

Amick Corp.

Multiple Step Income Statement

For the Year Ended December 31,2020

Accounts	Amount	Amount
Sales Revenue	$950,000
Less:- Cost of Goods Sold	(575,000)
Gross Profit		$375,000
Operating Expenses:-
Selling Expense:-
Promotion Expense	$15,000
Shipping Expense	25,000
Depreciation Expense (50% of $20,000)	10,000
Salaries (selling)	85,300
General and Administrative Expenses:-
Depreciation Expense (50% of $20,000)	$10,000
Salaries (general and Administrative)	80,000
Other General and Administrative Expenses	23,000
Total Operating Expenses		($248,300)
Operating Income		$126,700
Non operating and Others:-
Dividends Received on investment	$6,500
Interest Expense	(4,200)
Loss on sale of investments	(48,000)
Interest Revenue	2,500
Total Non Operating and Others		($43,200)
Income before Taxes		$83,500
Less:- Income Tax Expense (25%)		(20,875)
Net Income		$62,625
EPS		$3.13

Working Notes:-

1. Calculations for Income Tax Expense:-

Income Tax Expense=(25% of Net Income)

=($83,500*25/100)

=$20,875

2. Calculations for EPS:-

Earnings per share (EPS)=(Net Income/No. Of Shares)

=($62,625/20,000 shares)

=$3.13