Q7E.
Question
(Multiple-Step and Single-Step Statements) The accountant of Latifa Shoe Co. has piled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2017.
Rent revenue \(29,000
Interest expense 18,000
Market appreciation on land above cost 31,000
Salaries and wages expense (selling) 114,800
Supplies (selling) 17,600
Income tax 37,400
Salaries and wages expense (administrative) \)135,900
Other administrative expenses 51,700
Cost of goods sold 496,000
Net sales 980,000
Depreciation on plant assets (70% selling, 30% administrative) 65,000
Cash dividends declared 16,000
There were 20,000 shares of common stock outstanding during the year.
Instructions
- Prepare a multiple-step income statement.
- Prepare a single-step income statement.
- (c) Which format do you prefer? Discuss.
Step-by-Step Solution
VerifiedThe Net Income of Latifa Shoe Company is $86,900
An income tax refers to the obligatory payments made by any individuals, businesses, or corporations on the earnings earned.
| Latifa Shoe Company | ||
| Income Statement | ||
| For the Year Ended December 31, 2017 | ||
Net Sales |
| 980,000 |
Cost of Goods Sold |
| 496,000 |
Gross Profits |
| 484,000 |
Operating Expenses |
|
|
Administrative Expenses |
|
|
Salaries and Wages Expense | 135,900 |
|
Other Administrative Expenses | 51,700 |
|
Depreciation on Plant and Assets | 19,500 |
|
Total Administrative Expenses | 207,100 |
|
Selling Expenses |
|
|
Depreciation on Plant assets | 45,500 |
|
Supplies Expense | 17,600 |
|
Salaries and Wages expenses | 114,800 |
|
Total Selling Expenses | 177,900 |
|
Total Operating Expenses |
| 385,000 |
Income From Operations |
| 99,000 |
Other Revenues and Gains |
|
|
Rent Revenue |
| 29,000 |
Other Expenses and Losses |
|
|
Interest Expense |
| 18,000 |
Income before Income tax |
| 110,000 |
Income Tax Expense |
| 23,100 |
Net Income |
| 86,900 |
Earnings per Share |
| $4.34 |
Working Note
- Calculation of Earnings per share
| Latifa Shoe Company | |
| Income Statement | |
| For the Year Ended December 31, 2017 | |
Revenues |
|
Net Sales | 980,000 |
Rent Revenues | 29,000 |
Total Revenues (A) | 1,009,000 |
Expenses |
|
Cost of Goods Sold | 496,000 |
Selling Expenses | 177,900 |
Administrative Expenses | 207,100 |
Interest expenses | 18,000 |
Total Expenses (B) | 899,000 |
Income before Income taxes | 110,000 |
Income tax expenses | 23,100 |
Net Income | $86,900 |
Earnings per Share | $4.34 |
Working Note
- Calculation of Earnings per Share
Multiple-step income statement is always preferable because it provides an in-depth analysis of all the business activities for a particular period.