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Q10SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 297

Short Answer

Camilia Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:

Cash $ 2,900 Cost of Goods Sold $ 18,700

Selling Expenses 1,400 Equipment, net 9,500

Accounts Payable 4,300 Accrued Liabilities 1,800

Common Stock 4,365 Net Sales Revenue 29,200

Notes Payable, long-term 500 Accounts Receivable 3,200

Merchandise Inventory 1,100 Interest Expense 65

Administrative Expenses 3,300

Prepare Camilia Communication’s multi-step income statement for the year ended July 31, 2018.

Answer

The net income of the company is $5,735.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Multi-Step Income Statement

A multi-step income statement follows a different way of presenting revenues and expenses associated with a business concern. It separately reports the operating and non-operating revenues and expenses for better presentation and understanding.

Step 2: Preparation of multi-step income statement

Camilia Communications
Multi-step Income Statement
For the year ended July 31, 2018
ParticularsAmounts ($)
Net sales revenue 29,200
Less: Cost of goods sold(18,700)
Gross profit10,500
Operating expenses
Selling expenses(1,400)
Administrative expenses(3,300)
Income from operations5,800
Other expenses
Interest expense(65)
Net income5735

Most popular questions for Business-studies Textbooks

Party-Time T-Shirts sells T-shirts for parties at the local college. The company completed the first year of operations, and the shareholders are generally pleased with operating results as shown by the following income statement:

PARTY-TIME T-SHIRTS

Income Statement

Year Ended December 31, 2017

Net Sales Revenue $350,000

Cost of Goods Sold 210,000

Gross Profit 140,000

Operating Expenses:

Selling Expense 40,000

Administrative Expense 25,000

Net Income $75,000

Bill Hildebrand, the controller, is considering how to expand the business. He proposes two ways to increase profits to $100,000 during 2018.

a. Hildebrand believes he should advertise more heavily. He believes additional advertising costing $20,000 will increase net sales by 30% and leave administrative expense unchanged. Assume that Cost of Goods Sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, Cost of Goods Sold will increase proportionately.

b. Hildebrand proposes selling higher-margin merchandise, such as party dresses, in addition to the existing product line. An importer can supply a minimum of 1,000 dresses for $40 each; Party-Time can mark these dresses up 100% and sell them for $80. Hildebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. Party-Time can expect to sell only 80% of these dresses during the coming year.

Help Hildebrand determine which plan to pursue. Prepare a multi-step income statement for 2018 to show the expected net income under each plan.

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