Preparing a Multiple‐Step Income Statement Purpose of Assignment The purpose of this assignment is to help you become familiar with the parts of the multiple‐step income statement. Assignment Steps Resources: Financial Accounting: Tools for Business Decision Making Scenario: An inexperienced accountant prepared this condensed income statement for Simon Company, a retail firm that has been in business for a number of years. SIMON COMPANY Income Statement For the Year Ended December 31, 2017 Revenues Net sales $850,000 Other revenues 22,000 872,000 Cost of goods sold 555,000 Gross profit 317,000 Operating expenses Selling expenses 109,000 Administrative expenses 103,000 212,000 Net earnings $105,000 As an experienced, knowledgeable accountant, you review the statement and determine the following facts: Net sales consist of: sales $911,000, less freight-out on merchandise sold $33,000, and sales returns and allowances $28,000. Other revenues consist of sales discounts $18,000 and rent revenue $4,000. Selling expenses consist of salespersons’ salaries $80,000, depreciation on equipment $10,000, advertising $13,000, and sales commissions $6,000. The commissions represent commissions paid. At December 21, $3,000 of commissions have been earned by salespersons but have not been paid. All compensation should be recorded as Salaries and Wages Expense. Administrative expenses consist of office salaries $47,000, dividends $18,000, utilities $12,000, interest expense $2,000, and rent expense $24,000, which includes prepayments totaling $6,000 for the first quarter of 2018. Prepare a detailed multi-step income statement with a brief explanation of 700 words. Assume a 25% tax rate. Show your work on the Excel® spreadsheet and submit with your explanation.




    There are two deep kinds of completeowance announcements that are recurrently used and these apprehend; Multi-stalk completeowance announcement and unique stalk completeowance announcement. With Multi-stalk completeowance announcement, there is past than undisjoined disconnection to come-to at the net completeowance which comprehends past advice than a unique stalk completeowance announcement, the most suggestive undisjoined life the impure emolument as courteous as the exercise emolument.  This kind of announcement is disjoined into two deep minoritys that apprehend the unconditional minority as courteous as the non-unconditional part, future the unconditional minority entails advice respecting revenues as courteous as expenses amid the postulate activities of the transaction (Bajkowski, 1999). Barring respecting the impure emolument and the unconditional emolument grounds is conducive in the minority of exercise ce the multi-stalk completeowance announcement. However, complete unconditional revenues are then regrouped at the head of the completeowance stamen, age the unconditional expenses are grouped into subclasses of consume of chattels sold, expenses complicated in selling as courteous as negotiative expenses.

    Furthermore, selling expenditures refers to those that are spending promptly on making ales. Ce case there are examples of selling expenses that apprehend; sales commissions, sales salaries, expenses complicated in plan, expenses complicated in delivery of services and other products and lastly diminution expenses ce equipments. On the other laborer, the negotiative expenses are connected to open negotiative activities such as diminution expenses on the edifice station, station salaries, and victuals to the station expenses as courteous as expenses ce station utilities ( Besides, according to Virginia Smcomplete Transaction Development Center Network (2011)  “the non-unconditional minoritys of multiple stalk completeowance announcement is besides public as other completeowance and expenses which entails the revenues and those that are refercogent eared promptly through the deep activities of the transaction barring are considered cetuitous to the transaction such as when the transaction incurs mislayinges, gains of sale of any fond siege or agricultural property and cause expenses.” The non-unconditional minority besides entails peculiar aces of revenues as courteous as expenses that are refercogent regeneral and refercogent general enjoy mislaying resulting from true visitation.

    Furthermore, this kind if completeowance announcement is public  to keep the subjoined utilitys balance unique stalk completeowance announcement and these apprehend;  it dispose circumspection of impure emolument whereby the impure emolument has to be equipollent to sales ce the fond age minus the consume of the chattels sold. By using this kind of announcement, undisjoined is cogent to discern how abundant the corporation is generating on its sales precedently the consequence of the unconditional completeowance (Kokemullar,  n.d). By life cogent to discern the impure emolument, it’s potential to enumerate impure edge by dividing sales by impure emolument which helps to produce specific advice used to parallel the general and ceegoing impure edge and the perseverance stands to found how efficient the transaction is making emolument on its sales.

    The other utility as to why multi-stalk completeowance announcement is conducive is that is separates twain the unconditional and non-unconditional completeowances which dispose relief of analyzing how abundant the net completeowance ce the fond age that is superficial from the matter-of-event transaction activities, inasmuch-as with unique stalk completeowance announcement, there is no possibility of having specific breakdown in whole area which opposed efficient segregation of completeowance. However, opposing the event that this kind of announcement is past conducive and specific ce the corporation to heave extinguished its financial segregation efficiently, multi-stalk completeowance announcements keep the subjoined setbacks; interval ce provision whereby from accounting consequences, this kind of announcements abundant interval in provision paralleld to unique stalk completeowance announcement chiefly amid whole order gone it entails completeowance disconnection(Hanks, n.d);  besides, gone the announcement comprehend a specific inventory of uncertain sources of revenues as courteous as expenses and this implies that past interval is required to dispose the segregation of financial grounds and its division to the announcement.

    Lastly, multi stalk completeowance stamen entails some levels of indistinctness ascribable to the event that the announcement entails though specific barring verbose grounds which authority administer to indistinctness in its solution. Again some space of the announcement are superfluous to chattels an efficient follow-up ascribable to the form each ace show and is conducive. However, opposing the event that the announcement has a hanker inventory of aces that authority administer to indistinctness, multi-stalk completeowance announcement is the most widely used gone it produces specific and absolved advice on how a fond corporation generates emolument from its sales and gone whole ace is inventoryed, it’s potential to segregation and found the chattels of each ace on the emolumentability of the corporation.


    Bajkowski, J. (1999). Financial Announcement Segregation: A Look at The Completeowance Sheet

    Hanks, G. (n.d). Multi-Stalk Completeowance Announcement Vs. Unique-Stalk Announcement

    Kokemullar, N.  (n.d). Utilitys & Disadvantages of Multi-Stalk Completeowance Announcement

    Virginia Smcomplete Transaction Development Center Network. (2011). Financial Announcement Segregation Ce Smcomplete Transactiones.