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On October 31, 2016, the balances of the accounts appearing in the ledger of Prestige Furnishings...

Question:

On October 31, 2016, the balances of the accounts appearing in the ledger of Prestige Furnishings Company, a furniture wholesaler, are as follows:

Accumulated Depreciation - Building 5,750,000
Administrative Expenses 540,000
Building 2,500,000
Cash 175,000
Common Stock 300,000
Cost of Merchandise Sold 3,800,000
Dividends 175,000
Interest Expense 10,000
Merchandise Inventory $980,000
Notes Payable 250,000
Office Supplies 20,000
Retained Earnings 1,287,000
Salaries Payable 8,000
Sales 6,410,000
Selling Expenses 715,000
Store Supplies 90,000

(a) Prepare a multiple-step income statement for the year ended October 31, 2016. (b) Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.

Preparing Multiple-Step Income Statement from the Ledger:

A multiple-step income statement consists of various intermediate profits or income such as gross profit, operating profit, profit before tax etc. while a single-step income statement does not contain intermediate profits or income but consists the net income or profit after tax.

Answer and Explanation:

The answers to both the given sub-questions are explained below:

(a) Multiple-step income statement for the year ended October 31, 2016

Here,...

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
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