Question

Exercise 4-5 (Part Level Submission) 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 2017 information related to Kingbird Company ($000 omitted). Administrative expense Officers' salaries $4,957 Depreciation of office furniture and equipment 4,017 Cost of goods sold 60,627 Rent revenue 17,287 Selling expense Delivery expense 2,747 Sales commissions 8,037 Depreciation of sales equipment 6,537 Sales revenue 96,557 Income tax 9,127 Interest expense 1,917 Common shares outstanding for 2017 total 40,550 (000 omitted).

(a) Prepare an income statement for the year 2017 using the multiple-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

a) multiple - step Income Statement

For the year ending 2017

Particulars	Amount $
Sales	96,557
Less: Cost of Goods Sold	60,627
Gross Profit	35,930
Expense
Administration expenses	4,957
Depreciation on Office furnitures	4,017
Selling expenses	2,747
Sales commission	8,037
Depreciation on sale of equipment	6,537
Operating Income	9,635
Add:Non operating income - Rent Revenue	17,287
EBIT	26,922
Less: Interest	1,917
EBT	25,005
Tax	9,127
Net Income	15,878

EPS = Net Income / No. Of stock holder

EPS = $15,878/40,550 = 0.39

Income statement

Single step method

For the year ending 2017

Revenue	$
Sales	$96,557
Rent Revenue	17,287
Total Revenue	113,844
Expense
Administration expenses	4,957
Depreciation of office furniture	4,017
Selling expenses	2,747
Sales commission	8,037
Cost of goods sold	60,627
Depreciation on sale of Equipment	6,537
Interest	1,917
Tax	9,127
Net Income	15,878

EPS = Net Income / no. of common stock

EPS =$15,878/40550 = 0.391