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Income Statement: Format: Single Step: List All Revenues and Subtotal

The document provides examples of single-step and multi-step income statement formats. It then provides two practice problems, asking to prepare income statements based on given financial transactions using the formats outlined. The first practice problem provides transactions for Prepaid Legal, Inc. for the month of January and asks for a single-step income statement. The second provides annual financial data for a company and asks for a multi-step income statement.

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Rabia Rabia
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220 views2 pages

Income Statement: Format: Single Step: List All Revenues and Subtotal

The document provides examples of single-step and multi-step income statement formats. It then provides two practice problems, asking to prepare income statements based on given financial transactions using the formats outlined. The first practice problem provides transactions for Prepaid Legal, Inc. for the month of January and asks for a single-step income statement. The second provides annual financial data for a company and asks for a multi-step income statement.

Uploaded by

Rabia Rabia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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INCOME STATEMENT

Format:

Single Step:   List all revenues and subtotal


                                      List all expenses and subtotal
                                      Total revenues less total expenses = net income
 
 
 
            Multi Step:         Sales
                                    -    CGS___________
                                    =   Gross Profit
                                    -    Operating expense
                                    =   Income from operations
                                    + - Other revenues and expenses
                                    =   Income before tax expense
                                    -    Tax expense
                                    = Income from continuing operations
                                    +-  Discontinued operations
                                    +-  Extraordinary items
                                                                                
                                    =   Net Income

Practice Problem 1 – Income Statement - Reporting revenues and expenses                           


 
Prepaid Legal, Inc. had the following transactions occur during the month of January:
 
1)  Customers paid the company $480,000 for one year of legal service
        to be earned equally over the year.
2)  Employees worked and the company incurred $14,000 in salaries for 
       the month of January.
3)  The company paid $12,000 for salaries to employees during January.
4)  The December utility bill of $1,200 was paid in January
5)  The January utility bill of $2,500 was received but not paid.
6)  The company purchased office furniture for $32,000 in January that is
       expected to be used for the next 8 years.
7)  The company incurred $800 of interest expense in January that won’t 
        be paid until March.
8)  Liability insurance in the amount of $3,600 to cover the next six months 
       was paid for in January
9)  Rent for the first three months of the year was paid in January in the 
        amount of $6,000.
10)  Supplies costing $2,000 were purchased in January and supplies costing
          $275 were used up in January. 
 
Prepare a single step income statement for the month of January using 
  the accrual basis.

Practice Problem 2 – Prepare a Multi-Step Income Statement                            


 
The following items were taken from the company’s accounting records for the year ended
December 31st.  
 

Sales 5,400,000   General & Admin expense 850,000


Cost of Goods Sold 3,200,000 Selling expense 400,000
Interest Expense 70,000 Income tax expense 40%
Rent Income 80,000 Loss from selling a major 75,000
prod line
Loss on sale of building 15,000 Accumulated Depreciation 27,000
Unusual Loss 130,000 Dividends Paid 100,000
Research and Develop 125,000 Restructuring Expenses 180,000
Gain - Infrequent & Unusual 200,000 Accrued expenses 32,000
Prepaid Expenses 30,000 Salaries Payable 49,000

 
Prepare a multi-step income statement in proper format.

Practice Problem-03 Prepare a Multi-Step Income Statement                            

Debit Credit
   Sales 600,000
   Cost of goods sold (Cost of sales) 372,000
   Rent expense 31,200
   Salaries expense 40,800
   Supplies expense 25,200
   Insurance expense 13,800
   Depreciation expense 12,600
   Advertising expense 14,400
   Interest income 30,000
   Interest expense 24,000
   Income taxes expense 28,800

          

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