Accounting expense $1500 Commissions expense 2,415 Cost of goods sold 29,200 Dep
ID: 2355139 • Letter: A
Question
Accounting expense $1500
Commissions expense 2,415
Cost of goods sold 29,200
Depreciation expense - office building 2,900
income tax expenses 1,540
insurance expenses-salesperson auto 2,250
interest expense 1400
interest revenue 1340
rent revenue 6,700
salaries and wages expense-office 12,560
sales revenues 48,300
Suplies expense-office 890
1. Prepare a multiple-step income statement for the year ended December 31, 2008.
2. what advantages do you see in this form for the income statement?
3. compute Shaw's profit margin
4. Comment on Shaw's profitability. What other factors need to be taken into account to assess Shaw's profitability
Explanation / Answer
Multiple step Income statement:
Amt
There are three benefits to using a multiple step income statement instead of a single step income statement:
Multiple step Income statement:
Amt
Sales revenue $48,300 Less: Cost of goods sold ($29,200) Gross profit $19,100 Less: selling and general expenses: Commission expense $2,415 Insurance expense $2,250 Administrative expense: Salaries and wages $12,560 Supplies expense $890 Accounting expense $1,500 ($19,615) Operating income: ($515) Non operating expenses: Depreciation ($2,900) Non operating income: Rent revenue $6,700 Interest revenue $1,340 $8,040 Earnings Before Interest & Tax $4,625 Less: Interest expense ($1,400) Earnings Before Tax $3,225 Income tax expense ($1,540) Net Income $1,685