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 2017 information related to Blue Company ($000 omitted). $5,488 4,548 61,158 17,818 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 3,278 8,568 7,068 97,088 9,658 2,448 Interest expense Common shares outstanding for 2017 total 40,550 (000 omitted). (a) Prepare an income statement for the year 2017 using the multiple-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.) BLUE COMPANY Income Statement For the Year Ended December 31, 2017

Answer 1

Solution:

BLUE COMPANY
Income statement
For the year ended December 31,2017
( In thousands, except earnings per share)
Sales Revenue			$          97,088
(less):Cost of goods sold			$       (61,158)
Gross Profit			$          35,930
Operating expenses:
Selling expenses
Delivery expense	$       3,278
Sales Commissions	$       8,568
Depreciation of sales equipment	$       7,068
Total Selling Expense		$    18,914
General and administrative expenses
Officers` salaries	$       5,488
Depreciation of office furniture and equipment	$       4,548
Total General and administrative expenses		$    10,036
Total operating expenses			$       (28,950)
Operating Income ( Gross profit - Operating Expense)			$            6,980
Other income
Rent revenue			$          17,818
			$          24,798
Other Expense
Interest expense			$          (2,448)
Income before income tax			$          22,350
(less): income tax			$          (9,658)
Net income			$          12,692
Earnings per Common Stock ( $ 12,692 / 40,550 Shares )			$              0.31

Note:

1) For all the amounts $`000 omitted except earnings per share.

2) Rent revenue comes under other revenue because it is considered as other source of revenue.