Question

Multiple-Step Income Statement

On March 31, 20Y9, the balances of the accounts appearing in the ledger of Royal Furnishings Company, a furniture store, are as follows:

Accounts Receivable	$170,000		Inventory	$932,650
Accumulated Depreciation—Building	773,900		Notes Payable	287,550
Administrative Expenses	519,200		Office Supplies	20,300
Building	2,581,250		Retained Earnings	1,331,300
Cash	167,000		Salaries Payable	8,200
Common Stock	307,150		Sales	6,474,250
Cost of Goods Sold	3,924,850		Selling Expenses	698,700
Dividends	175,250		Store Supplies	86,500
Interest Expense	10,100

a. Prepare a multiple-step income statement for the fiscal year ended March 31, 20Y9.

Royal Furnishings Company
Income Statement
For the Year Ended March 31, 20Y9
		$
Gross profit		$
Expenses:
	$
Total expenses
		$
Other expense:
		$

b. What is a major advantage of the multiple-step income statement over the single-step income statement?

Answer 1

Requirement a:

Royal Furnishings Company
Income statement (multi-step)
For the year ended March 31, 20Y9
Sales		$ 6,474,250
Cost of goods sold		($ 3,924,850)
Gross profit		$ 2,549,400
Operating Expenses:
Administrative expense	$ 519,200
Selling expense	$ 698,700
Total operating expenses		$ 1,217,900
Operating income		$ 1,331,500
Other revenues and expenses:
Interest expense		$ 10,100
Net income		$ 1,321,400

Requirement b:

Major advantage in multiple-step income statement is get the relationship between sales and grossprofit and each head recorded seperately.

The multiple-step income statement is more advantage for the knowing all the values seperately and recognize the errors fastely.

In single-step income statement we record all revenues in one head and all expenses in seperate head , so in single-step income statement did not get the relationship between sales, grossprofi and net income.