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Multiple-step and Single-step Income Statement

(Multiple-step and Single-step) Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting and income statement in a multiple-step versus a single-step format. The discussion involves the following 2007 information related to P. Bride Company ($000 omitted).

Administrative expense
Officer's salaries $4,900
Depreciation of office furniture and equipment $3.960
Cost of goods sold $60,570
Rental revenue $17,230

Selling expense
Transportation-out $2,690
Sales commissions $7,980
Depreciation of sales equipment $6,480
Sales $96,500
Income tax $9,070
Interest expense $1,860

a.Prepare an income statement for the year 2007 using the multiple-step form. Common shares outstanding for 2007 total 40,550 (000 omitted)
b.Prepare an income statement for the year 2007 using the single-step form
c.Which one do you prefer? Discuss.

Solution Preview

Please see the attached file.

(a) Multi Step - Here we have subtotals and distinguish between operating and non operating items
Non operating are shown as other income and expense
P. Bride Company
Income Statement
For the Year Ended December 31, 2007
($' 000)
Sales $96,500
Cost of goods sold 60,570
Gross profit 35,930
Operating Expenses
Selling expenses

Solution Summary

The solution explains how to prepare a single-step and a multiple-step income statement