Chapter 4: 11 (page 179)
What are the advantages and disadvantages of the single-step income statement?
Short Answer
Expert verified
Simplicity, understandability by a layperson, focuses primarily on revenues, and expenses are the various advantages. The absence of showing relationships between the cost of goods sold and sales is considered a disadvantage of a single-step income statement.
Step by step solution
01
Meaning of Single-Step Income statement
The single-step income statement is aformat used to report the revenues and expenses of a company. It includes only two major groups, i.e., revenues and expenses.
02
Advantages and disadvantages of a single-step income statement
The advantages of a single-step income statement are this statement format is very simple to present and can be easily understood even by the layperson. This income statement only focuses on the net income calculated by deducting all the expenses from the revenues. The major disadvantage of the single-step income statement is the absence of showing the important relationship between sales revenue and the cost of goods sold. It also excludes the potential classifications such as income from operations, income after and before taxes, etc.
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Most popular questions from this chapter
Indicate the section of a multiple-step income statement in which each of the following is shown.
(a) Loss on inventory write-down.
(b) Loss from strike.
(c) Bad debt expense.
(d) Loss on disposal of a discontinued operation.
(e) Gain on sale of machinery.
(f) Interest revenue.
(g) Depreciation expense.
(h) Material write-offs of notes receivable.
Lebron Co. owns most but not all of the shares of its subsidiary Bryant Inc. Lebron reported net income of \(124,700. The amount to be attributed to the noncontrolling interest in Bryant is \)30,000. Indicate how Lebron will report the noncontrolling interest in its income statement.
Brisky Corporation had net sales of \(2,400,000 and interest revenue of \)31,000 during 2017. Expenses for 2017 were cost of goods sold \(1,450,000, administrative expenses \)212,000, selling expenses \(280,000, and interest expense \)45,000. Brisky’s tax rate is 30%. The corporation had 100,000 shares of common stock authorized and 70,000 shares issued and outstanding during 2017. Prepare a single-step income statement for the year ended December 31, 2017.
In 2017, Hollis Corporation reported net income of \(1,000,000. It declared and paid preferred stock dividends of \)250,000. During 2017, Hollis had a weighted average of 190,000 common shares outstanding. Compute Hollis’s 2017 earnings per share.
What kinds of questions about future cash flows do investors and creditors attempt to answer with information in the income statement?
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