Chapter 5 - Multi Step Income Statement

What is the purpose of a multi-step income statement?

• To calculate the company's net income before taxes.

• To highlight the company's non-operating income and expenses.

• To provide a more detailed and comprehensive view of a company's financial performance.

• To summarize a company's financial performance in a single step.

What is net sales?

• Total sales revenue after deductions

• Total sales revenue before deductions.

• Total sales revenue without deductions.

• Total sales revenue including deductions.

How is gross profit calculated?

• Income from Operations - Cost of goods sold (COGS)

• Sales Revenue - Cost of goods sold (COGS)

• Total revenue / Cost of goods sold (COGS)

• Net Sales - Cost of goods sold (COGS)

What are operating expenses?

• Costs incurred by a business in its monthly operations.

• Costs incurred by a business in its long-term operations.

• Costs incurred by a business in its day-to-day operations.

• Costs incurred by a business in its production operations.

Give an example of other revenues and gains.

• Operating expenses, depreciation, and taxes.

• Rental income, interest income, gains from the sale of assets, and dividends received from investments.

• Cost of goods sold, research and development expenses, and marketing expenses.

• Salary income, capital gains, and royalties.

What are other expenses and losses?

• Depreciation expenses

• Research and development costs

• Interest expenses

• Costs or financial losses incurred by a business that are not directly related to its core operations or cost of goods sold.

Explain the difference between net sales and gross profit.

• Net sales is the revenue generated from sales before deducting sales returns, discounts, and allowances, while gross profit is the difference between net sales and the cost of goods sold.

• Net sales is the revenue generated from sales after deducting the cost of goods sold, while gross profit is the total revenue generated from sales.

• Net sales is the revenue generated from sales after deducting the cost of goods sold, while gross profit is the total revenue generated from sales after deducting sales returns, discounts, and allowances.

• Net sales is the revenue generated from sales after deducting sales returns, discounts, and allowances, while gross profit is the difference between net sales and the cost of goods sold.

What is the formula for income taxes?

• Income Tax = Income Before Income Tax * Tax Rate

• Income Tax = Income Before Income Tax - Tax Rate

• Income Tax = Net Income * Tax Rate

• Income Tax = Net Income - Tax Rate

What are the contra revenue accounts?

• Sales Returns and Allowances, Sales Discounts

• Cost of Goods Sold and Inventory

• Revenue, Expenses, and Liabilities
• Assets, Liabilities, and Equity

If:

Net Sales = 500,000

Operating Expenses = 150,000

Cost of Goods Sold = 200,000

Income from Operations = 150,000

What is Gross Profit?