Question

2.

The following is a partial trial balance for General Lighting Corporation as of December 31, 2021:

Account Title	Debits	Credits
Sales revenue		2,750,000
Interest revenue		88,000
Loss on sale of investments	26,500
Cost of goods sold	1,270,000
Loss on inventory write-down (obsolescence)	280,000
Selling expense	380,000
General and administrative expense	190,000
Interest expense	87,000

There were 300,000 shares of common stock outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25%.

Required:

1. Prepare a single-step income statement for 2021, including EPS disclosures.

2. Prepare a multiple-step income statement for 2021, including EPS disclosures.

Answer 1

Single Step Income Statement:-

In Single Step Income Statement shows only Revenue and Expenses, Single Step Income Statement doesn't show Gross Profit.

Multiple Step Income Statement:-

In multiple Step Income Statement Expenses and Revenue categorised into Operating Expenses and Revenue, Non Operating Expenses and Revenue, Multiple Step Income Statement also shows Gross Profit (Sales Revenue minus Cost of Goods Sold).

Preparing Single Step Income Statement:-

GENERAL LIGHTING CORPORATION

Single Step Income Statement

For the Year Ended December 31,2021

Accounts	Amount	Amount
Revenues:-
Sales Revenue	$2,750,000
Interest Revenue	88,000
Total Revenues		$2,838,000
Less:- Expenses
Cost of Goods Sold	$1,270,000
Selling Expense	380,000
General and Administrative Expense	190,000
Loss on Sale of Investments	26,500
Loss on Inventory write - down (obsolescence)	280,000
Interest Expense	87,000
Total Expenses		$(2,233,500)
Income Before Taxes		$604,500
Less:- Income Tax (@ 25%)		(151,125)
Net Income		$453,375
EPS		$1.51

Preparing Multiple Step Income Statement:-

GENERAL LIGHTING CORPORATION

Multiple Step Income Statement

For the Year Ended December 31,2021

Accounts	Amount	Amount
Sales Revenue	$2,750,000
Less:- Cost of Goods Sold	(1,270,000)
Gross Profit		$1,480,000
Less:- Operating Expenses
Selling Expense	$380,000
General and Administrative Expense	190,000
Total Operating Expenses		$(570,000)
Operating Income		$910,000
Non Operating and Others:-
Interest Revenue	88,000
Interest Expense	(87,000)
Loss on Sale of Investments	(26,500)
Loss on Inventory write - down (obsolescence)	(280,000)
Total Non Operating and Others		$(305,500)
Income Before Taxes		$604,500
Less:- Income Tax Expense (@ 25%)		(151,125)
Net Income		$453,375
EPS		$1.51

Working Notes:-

Calculations for Income tax Expense:-

Income tax Expense=(Net Income × 25%)

=($604,500×25/100)

=$151,125

Calculations for EPS:-

EPS =(Net Income/ Shares of Common Stock Outstanding)

=($453,375/300,000 shares)

=$1.51