Question

Prepare an income statement for 2018 (use the multistep format).

1. Acquired $30,000 cash from the issue of common stock.
2. Purchased inventory for $18,000 cash.
3. Sold inventory costing $15,000 for $32,000 cash.

Answer 1

To prepare an income statement for 2018, we calculate the gross profit by subtracting cost of goods sold from sales revenue. Operating expenses are not provided, so operating income is equal to gross profit. Net income is then also equal to operating income as interest and taxes are not mentioned.

Step-by-step explanation:

Income Statement Preparation

To prepare the income statement for 2018 using the multistep format, we need to compute gross profit, operating income, and net income. Here is the simplified presentation:

Income Statement for the Year Ended December 31, 2018

Sales Revenue: $32,000

Cost of Goods Sold: ($15,000)

Gross Profit: $17,000

(Operating expenses are not provided and thus are assumed to be $0 in this simplified example, though this would not typically be the case in a real-world situation)

Operating Income: $17,000

(Interest and taxes are not mentioned, therefore are not accounted for here, but would be subtracted from Operating Income to find Net Income in a comprehensive income statement.)

Net Income: $17,000