Question

Multiple-Step Income Statement

On March 31, 20Y5, the balances of the accounts appearing in the ledger of Lange Daughters Inc. are as follows:

Administrative Expenses		$ 950,000		Inventory		$ 800,000
Accumulated Dep. - Building		4,000,000		Notes Payable		900,000
Building		19,000,000		Office Supplies		50,000
Common Stock		1,000,000		Retained Earnings		12,365,000
Cash		2,970,000		Sales		17,850,000
Cost of Goods Sold		10,350,000		Selling Expenses		1,650,000
Dividends		200,000		Store Supplies		150,000
Interest Expense		45,000

a. Prepare a multiple-step income statement for the year ended March 31, 20Y5.

b. Compare the major advantages and disadvantages of the multi- and single-step forms of income statements.

P 4-4

Multiple-Step Income Statement and Report Form of Balance Sheet

The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September 30, 20Y8:

Cash		$187,875		Retained Earnings		$ 571,050
Accounts Receivable		337,500		Dividends		281,250
Inventory		855,000		Sales		8,025,750
Estimated Returns Inventory		78,750		Cost of Goods Sold		4,893,750
Office Supplies		33,750		Sales Salaries Expense		874,800
Prepaid Insurance		27,000		Advertising Expense		103,275
Office Equipment		259,200		Depreciation Expense— Store Equipment		18,675
Accumulated Depreciation— Office Equipment		111,375		Miscellaneous Selling Expense		4,500
Store Equipment		1,150,875		Office Salaries Expense		174,150
Accumulated Depreciation— Store Equipment		420,075		Rent Expense		89,775
Accounts Payable		109,350		Insurance Expense		51,638
Customer Refunds Payable		78,750		Depreciation Expense— Office Equipment		36,450
Salaries Payable		21,600		Office Supplies Expense		3,712
Note Payable (final payment due in five years)		121,500		Miscellaneous Administrative		4,275
Common Stock		33,750		Interest Expense		27,000

Instructions:

1. Prepare a multiple-step income statement.

2. Prepare a statement of stockholders' equity. No common stock was issued during the year. For those boxes in which no entry is required, leave the box blank.

3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $24,300.

Answer 1

1. Multiple Income statement

Particulars	Amount
Sales	17850,000
Less : Cost of Goods Sold	10350000
Gross profit	7500,000
Less : Operating expenses Office Supplies 50,000 Administrative Expenses 950,000 Selling Expenses 1650000	2650000
Income from operations	4850,000
Other revenues and expense	45,000
Net income	4805,000

2. Advantages

Multiple income statement	Single income statement
It is a itemised list of income and expenses. It determines the companies gross profit of difference between the sales and cost of goods sold and operating expenses.	It is simplified income statement represents in a single line. In this, all incomes and expenses all added together.

Disadvantages

Multiple income statement	Single income statement
It represents the companies detailed operations. It is complex and time consuming.	It is a lack of relevant information to the investors and lenders. It does not segregate activities of the company.