E4.5 (lo 2) (multiple-step and single-step statements) two accountants for the firm of elwes and wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. the discussion involves the following 2020 information related to p. bride company ($000 omitted). administrative expense officers’ salaries $ 4,900 depreciation of office furniture and equipment 3,960 cost of goods sold 60,570 rent revenue 17,230 selling expense delivery expense 2,690 sales commissions 7,980 depreciation of sales equipment 6,480 sales revenue 96,500 income tax 9,070 interest expense 1,860 instructions a. prepare an income statement for the year 2020 using the multiple-step form. common shares outstanding for 2020 total 40,550 (000 omitted). b. prepare an income statement for the year 2020 using the single-step form. c. which one do you prefer? discuss.

In the Multistep income it's possible to segregate the operative expenses and  revenues of the non operative, it also shows the gross profit, which is  

the Net Sales Revenues less the Cost of Goods Sold.  

First it's shown the Gross Profit, then substracted the operating expenses  

to arrive at operating income.

Finally with the non operating movements we have the net Income After Taxes and with the taxes expenses we have the Net Income of the company.

By the way in the Single Step Income doesn't exist a segregation in the expenses, it doesn't break the expenses into cateogories, so all the expenses are listed together.

It means the financial statement doesn't give much information to the external users about the company operations.

Explanation:

2020Multi Step - Income Statement

$ 96.500,000Sales

$ 96.500,000Net Sales Revenues

-$ 6.480,000  Depreciation of sales equipment

-$ 60.570,000Cost of goods sold

-$ 67.050,000Cost of goods sold

$ 29.450,000Gross PROFIT

-$ 7.980,000  Sales commissions

-$ 4.900,000  Administrative expense Officers’ salaries  

-$ 3.960,000  Depreciation of office furniture and equipment  

-$ 2.690,000  Selling expense Delivery expense

-$ 19.530,000Operating Expenses

$ 9.920,000    INCOME FROM OPERATIONS

$ 17.230,000  Rent Revenue

$ 17.230,000  Other Revenues and Gains:

-$ 1.860,000  Interest Expenses

-$ 1.860,000  Other expenses and Loss

$ 25.290,000NET INCOME AFTER TAXES

-$ 9.070,000  Income Tax Expenses

$ 16.220,000  Net INCOME

2020Single Step - Income Statement

$ 96.500,000Sales

$ 17.230,000  Rent Revenue

$ 113.730,000TOTAL REVENUES

-$ 60.570,000Cost of goods sold

-$ 10.440,000Depreciation Expense

-$ 12.880,000Wage Expenses

-$ 2.690,000  Supplies Expenses

-$ 1.860,000  Interest Expenses

-$ 88.440,000TOTAL EXPENSES

-$ 9.070,000  Income Tax Expenses

$ 16.220,000  Net INCOME

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