Question

Multiple-Step Income Statement

• Use the following information to prepare a multiple-step income statement, including the revenue section and the cost of goods sold section, for Sauter Office Supplies for the year ended December 31, 20--.

Sales	$156,283
Sales Returns and Allowances	2,051
Sales Discounts	4,185
Interest Revenue	420
Merchandise Inventory, January 1, 20--	28,849
Purchases	111,557
Purchases Returns and Allowances	5,252
Purchases Discounts	2,686
Freight-In	887
Merchandise Inventory, December 31, 20--	33,013
Wages Expense	27,582
Supplies Expense	760
Phone Expense	913
Utilities Expense	8,000
Insurance Expense	1,287
Depreciation Expense—Equipment	3,792
Miscellaneous Expense	602
Interest Expense	4,710

X

Generalized Statement

Sauter Office Supplies
Income Statement
For Year Ended December 31, 20--
Revenue from sales:
Sales			$
Less sales returns and allowances		$
Less sales discounts
Net sales				$
Cost of goods sold:
Merchandise inventory, January 1, 20--			$
Purchases		$
Less purchases returns and allowances	$
Less purchases discounts
Net purchases		$
Add freight-in
Cost of goods purchased
Goods available for sale			$
Less merchandise inventory, December 31, 20--
Cost of goods sold
Gross profit				$
Operating expenses:
Wages expense			$
Supplies expense
Phone expense
Utilities expense
Insurance expense
Depreciation expense-equipment
Miscellaneous expense
Total operating expenses
Income from operations				$
Other revenues:
Interest revenue			$
Other expenses:
Interest expense
Net income				$

Feedback

Net sales (with details) – Cost of goods sold (with details) = Gross profit – Operating expenses = Income from operations + Other revenues – Other expenses = Net income (loss)
It is important to have a solid understanding of the sequence of the above components of a multiple-step income statement.
Refer to Figure 15-3 in the text.

Answer 1

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