Question

Wildhorse Corporation had net sales of $2,410,900 and interest revenue of $36,700 during 2020. Expenses for 2020 were cost of goods sold $1,460,400, administrative expenses $218,600, selling expenses $286,400, and interest expense $50,800. Wildhorse’s tax rate is 30%. The corporation had 105,200 shares of common stock authorized and 73,090 shares issued and outstanding during 2020. Prepare a condensed multiple-step income statement for Wildhorse Corporation. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

Step-by-step explanation:

‘Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to evaluate the net income generated in a particular period.

As per the ‘Multi-step Income Statement’ format, the operating expenses and revenue earned are segregated from non-operating expenses and revenues, gain or losses. It is calculated in 4 steps, i.e., gross profit, operating expenses, non-operating income and finally the net income.

Step 1: Calculation of Gross Profit

The first step in multi-step income statement is to calculate ‘Gross Profit’. Gross Profit is the sales revenue less the cost of goods sold during a particular period.

Step 2: Calculation of total operating expense

The second step in multi-step income statement is to calculate ‘Total Operating Expenses’. All the expenses that are incurred for the business operations are shown under the head ‘Operating Expenses’.

Step 3: Calculation of non-operating income

The third step in multi-step income statement is to calculate ‘Total Non-operating Income’. All the expenses that are indirectly related to the business operations are shown under the head ‘Non-operating Expenses’ whereas income from such sources is recorded under ‘Non-operating revenue’.

Step 4: Calculation of Net Income

The fourth step in multi-step income statement is to calculate ‘Net Income’. Net Income is the income retained after paying off the taxes. Thus, taxes would be deducted from the head ‘Income before tax’.