Question

r supervisor has provided you with the following draft statement of income:

Smoking’ Hot Ltd.

Statement of Income

Year Ended October 31, 2020

Sales	$76,445,500
Gain on sale of building	975,000
	77,420,500
Expenses
Cost of goods sold	48,542,900
Depreciation	660,100
Interest	93,200
Other operating	313,700
Rent	1,800,000
Salaries and wages	8,452,900
	59,862,800
Income before income taxes	17,557,700
Income tax expense	5,267,000
Net income	$12,290,700

Your supervisor has asked you to INDICATE whether the statement of income was prepared in the single step or multiple step format AND BRIEFLY EXPLAIN how you made that determination .

Answer 1

In order to identify the single step income statement or multiple step income statement we need to understand the meaning of the both the statement

Meaning:

Single step income statement is statement which shows the net profit of the firm whereas multiple step income statement shows the calculation of gross profit, operating profit and net profit.

How to identify the income statement ?

Single step income statement is simple to calculate and gives the net profit by taking the difference of revenue and expense. Whereas Multiple Step Income Statement is prepared in multiple steps. In Multiple Step Income Statement, first gross profit is calculate, on the basis of Gross Profit operating profit is calculated and in last step on basis of operating profit , net profit is calculated.

As per the given format of the Income Statement , it is clear that it is Single Step Income Statement as there is no bifurcation of gross profit , operating profit and net profit is given.

Thanks