Concept explainers
Exercise 1-48 Income Statement
The following information is available for Wright Auto Supply at December 31, 2019.
Required:
1. Prepare a single-step income statement for the year ended December 31, 2019.
2. Prepare a multiple-step income statement for the year ended December 31, 2,019.
3. CONCEPTUAL CONNECTION Comment on the differences between the single-step and the multiple-step income statements.
Concept Introduction:
Income Statement:
Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.
Requirement-1:
To Prepare:
The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019.
Answer to Problem 48E
The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is as follows:
Wright Auto Supply | ||
Single Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Revenues: | ||
Sales Revenue | $ 585,600 | |
Total Revenues | ||
Less: Expenses: | ||
Cost of goods sold | $ 292,000 | |
Depreciation expense | $ 31,250 | |
Interest expense | $ 2,400 | |
Income tax expense | $ 32,520 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Expenses | $ 509,720 | |
Net Income | $ 75,880 |
Explanation of Solution
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items. The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:
Wright Auto Supply | ||
Single Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Revenues: | ||
Sales Revenue | $ 585,600 | |
Total Revenues (A) | ||
Less: Expenses: | ||
Cost of goods sold | $ 292,000 | |
Depreciation expense | $ 31,250 | |
Interest expense | $ 2,400 | |
Income tax expense | $ 32,520 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Expenses (B) | $ 509,720 | |
Net Income (A-B) | $ 75,880 |
Concept Introduction:
Income Statement:
Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.
Requirement-2:
To Prepare:
The multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019.
Answer to Problem 48E
The multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is as follows:
Wright Auto Supply | ||
Multi Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Sales Revenue | $ 585,600 | |
Less: Cost of goods sold | $ 292,000 | |
Gross Profit | $ 293,600 | |
Less: Selling and Administrative expenses: | ||
Depreciation expense | $ 31,250 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Selling and Administrative expenses: | $ 182,800 | |
Operating income | $ 110,800 | |
Less: Interest expense | $ 2,400 | |
Income before tax | $ 108,400 | |
Less: Income tax expense | $ 32,520 | |
Net income | $ 75,880 |
Explanation of Solution
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items. The multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:
Wright Auto Supply | ||
Multi Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Sales Revenue | $ 585,600 | |
Less: Cost of goods sold | $ 292,000 | |
Gross Profit | $ 293,600 | |
Less: Selling and Administrative expenses: | ||
Depreciation expense | $ 31,250 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Selling and Administrative expenses: | $ 182,800 | |
Operating income | $ 110,800 | |
Less: Interest expense | $ 2,400 | |
Income before tax | $ 108,400 | |
Less: Income tax expense | $ 32,520 | |
Net income | $ 75,880 |
Concept Introduction:
Income Statement:
Income Statement is the part of the financial statement which is prepared to calculate the net income earned by the organization. In the income statement, all expenses are subtracted from the revenues to calculate the net income. It is prepared for a particular period.
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.
Requirement-3:
To Indicate:
The difference between the multi step and single step Income Statements.
Answer to Problem 48E
The difference between the multi step and single step Income Statements is explained as follows:
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items.
Explanation of Solution
The difference between the multi step and single step Income Statements is explained as follows:
There are two ways to present and income statement: Single-step and Multi-step. In the, multi-step income statement the net income calculated after showing multiple steps. In this statement operating and items are separate from non operating items. The multi step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:
Wright Auto Supply | ||
Multi Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Sales Revenue | $ 585,600 | |
Less: Cost of goods sold | $ 292,000 | |
Gross Profit | $ 293,600 | |
Less: Selling and Administrative expenses: | ||
Depreciation expense | $ 31,250 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Selling and Administrative expenses: | $ 182,800 | |
Operating income | $ 110,800 | |
Less: Interest expense | $ 2,400 | |
Income before tax | $ 108,400 | |
Less: Income tax expense | $ 32,520 | |
Net income | $ 75,880 |
The single step Income Statement for Wright Auto Supply for the year ended Dec. 31, 2019 is prepared as follows:
Wright Auto Supply | ||
Single Step Income Statement | ||
For the year ended Dec. 31, 2019 | ||
Revenues: | ||
Sales Revenue | $ 585,600 | |
Total Revenues (A) | ||
Less: Expenses: | ||
Cost of goods sold | $ 292,000 | |
Depreciation expense | $ 31,250 | |
Interest expense | $ 2,400 | |
Income tax expense | $ 32,520 | |
Rent Expense | $ 21,000 | |
Salaries expenses (Admn.) | $ 33,800 | |
Wages expense (Sales) | $ 96,750 | |
Total Expenses (B) | $ 509,720 | |
Net Income (A-B) | $ 75,880 |
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