Question

The accountant of Novak Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2020.

Rent revenue		$32,400
Interest expense		21,400
Market appreciation on land above cost		34,400
Salaries and wages expense (selling)		118,200
Supplies expense (selling)		21,000
Income tax		26,500
Salaries and wages expense (administrative)		139,300
Other administrative expenses		55,100
Cost of goods sold		499,400
Net sales		983,400
Depreciation on plant assets (70% selling, 30% administrative)		68,400
Cash dividends declared		19,400

There were 20,000 shares of common stock outstanding during the year.

A) Prepare a multi step income statement.

B) Prepare a single step income statement

Answer 1

Requirement A:

Novak Shoe Co.
Income Statement (Multi-Step)
For the year ended December 31,2020
Net sales			$983,400
Cost of goods sold			($499,400)
Gross profit			$484,000
Operating Expenses:
Selling expenses:
Salaries and wages expense (selling)	$118,200
Supplies expense (selling)	$21,000
Depreciation on plant assets [68,400 x 70%]	$47,880	$187,080
Administrative expenses:
Salaries and wages expense (administrative)	$139,300
Depreciation on plant assets [68,400 x 30%]	$20,520
Other administrative expenses	$55,100	$214,920
Total operating Expenses			$402,000
Operating income			$82,000
Other incomes(Expenses):
Rent revenue		$32,400
Interest expense		($21,400)
Total Other income(expense)			$11,000
Net income before income tax			$93,000
Income tax			($26,500)
Net income			$66,500
Earning per share [66,500 ÷ 20,000]			$3.325

Requirement B:

Novak Shoe Co.
Income Statement (Single-Step)
For the year ended December 31,2020
Revenues:
Net sales		$983,400
Rent revenue		$32,400
Total revenues		$1,015,800
Expenses:
Cost of goods sold	$499,400
Selling expenses	$187,080
Administrative expenses	$214,920
Interest expense	$21,400
Income tax expense	$26,500
Total expenses		$949,300
Net income		$66,500
Earning per share [66,500 ÷ 20,000]		$3.325

Note:

• Market appreciation on land above cost do not considered as income.
• Dividends declared is in come under 'Statement of retained earnings'.