Question

Preparing a Single-Step and a Multiple-Step Income Statement The following pretax information is taken from the adjusted trial balance of Trader J's Corp. at December 31, 2020, its annual year-end. Sales revenue, net Gain on sale of investment Depreciation expense Selling expense General and administrative expenses Rent revenue $950,000 8,000 25,000 140,000 92,300 18,000 7,000 9,000 80,000 10,000 550,000 30,000 Investment revenue Interest expense Recovery from prior expropriation loss Loss on sale of long-term investments Cost of goods sold Casualty loss Average income tax rate on all items Common stock outstanding 25% 40,000 shares

Answer 1

a. Single-Step Income Statement for the year ended 31st December, 2020

Particulars	Amount
Revenues and Gains
Sales Revenue, net	$9,50,000
Gain from recovery of Expropriation loss	$80,000
Rent revenue	$18,000
Gain on sale of Investment	$8,000
Investment revenue	$7,000
Total Revenue and Gains	$10,63,000
Expenses and Losses
Cost of Goods Sold	$5,50,000
Selling Expenses	$1,40,000
General and Administrative Expenses	$92,300
Casualty Loss	$30,000
Depreciation Expenses	$25,000
Loss on sale of long term investments	$10,000
Interest Expense	$9,000
Total Expenses and Losses	$8,56,300
Income before Income taxes	$2,06,700
Income Tax Expense rate @ 25% ($206700 X 25%)	$51,675
Net Income ($2,06,700 - $51,675)	$1,55,025
Earnings Per Share ($1,55,025 / 40,000 shares)	$3.87

b. Multiple Step Income Statement for the year ended 31st December 2020

Particulars	Amount
Sales Revenue, Net	$9,50,000
Less: Cost of Goods Sold	$5,50,000
Gross Profit	$4,00,000
Operating Expenses
Selling Expenses	$1,40,000
General and Administrative Expenses	$92,300
Depreciation Expenses	$25,000
Total Operating Expenses	$2,57,300
Operating Income ($4,00,000 - $2,57,300)	$1,42,700
Other Revenues and Gains:
Gain on Sale of Investments	$8,000
Investment Revenue	$7,000
Recovery from Prior Expropriation Loss	$80,000
Rent Revenue	$18,000
Total of Other Revenues and Gains	$1,13,000
Other Expenses and Losses:
Casualty Loss	$30,000
Loss on sale of long term Investments	$10,000
Interest Expenses	$9,000
Total of Other Expenses and Losses	$49,000
Income Before Income Taxes ($1,42,700 + $1,13,000 - $49,000)	$2,06,700
Income Tax Rate @ 25% ($2,06,700 X 25%)	$51,675
Net Income ($2,06,700 - $51,675)	$1,55,025
Earnings Per Share ($1,55,025 / 40,000 Shares)	$3.87