Question

The following information was taken from the accounts of Green Market, a small grocery store, at December 31, Year 2. The accounts are listed in alphabetical order, and all have normal balances.

Accounts payable $800
Accounts receivable 2,250
Advertising expense 600
Cash 1,850
Common stock 2,000
Cost of goods sold 2,950
Interest expense 120
Merchandise inventory 1,250
Prepaid rent 720
Retained earnings, 1/1/Year 2 2,610
Sales revenue 5,600
Salaries expense 960
Rent expense 510
Gain on sale of land 200

Required:
Prepare an income statement for the year using the single-step and multistep approach.

Answer 1

i. Single-Step Income Statement

GREEN MARKET

Income Statement

For the Year Ended December 31

Revenues & Gains Amounts$

Sales revenue 5,600

Gain on sale of land 200

Total revenue & gains 5,800

Expenses

Cost of goods sold (2,950)

Advertising expense (600)

Interest expense (120)

Salaries expense (960)

Rent expense (510)

Total cost and expenses (5,140)

Net Income $660

ii. Multistep Income Statement

GREEN MARKET

Income Statement

For the Year Ended December 31

Particulars Amount$

Sales revenue 5,600

Cost of goods sold (2,950)

Gross margin 2,650

Operating expenses

Salaries expense (960)

Advertising expense (600)

Rent expense (510)

Total operating expenses (2,070)

Operating income 580

Non-operating items

Gain on sale of land 200

Interest Expense (120) 80

Net Income $660