{"id":217780,"date":"2025-05-22T13:14:38","date_gmt":"2025-05-22T13:14:38","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=217780"},"modified":"2025-05-22T13:14:40","modified_gmt":"2025-05-22T13:14:40","slug":"sales-revenue-1500000-2-sales-returns-and-allowances-1485-3","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/22\/sales-revenue-1500000-2-sales-returns-and-allowances-1485-3\/","title":{"rendered":"Sales Revenue 1,500,000 2. Sales Returns and Allowances 1,485 3"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Sales Revenue 1,500,000 2. Sales Returns and Allowances 1,485 3. Beginning Stock 1,750 4. Purchases 100,145 5. Salaries Expense 3,800 6. Rent Expense 7,550 7. Advertising Expense 18,500 8. Depreciation Expense 8,000 9. Delivery Expense 14,500 10. Utilities Expense 112 11. Supplies Expense 1,475 12. Sales Discount 474 13. Purchase Discount 455 14. Closing Stock 332 15. Freight ln142 16. Interest Expense 2,740 17. Interest Revenue 2,200 18. Income Tax Expense 7,580 Prepare the multi-step income statement for Egotist Ltd 2022.<\/p>\n\n\n\n<ol class=\"wp-block-list\"><\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-1-color\">The Correct Answer and Explanation is:<\/mark><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here is the <strong>multi-step income statement<\/strong> for <strong>Egotist Ltd<\/strong> for the year ended 2022:<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Egotist Ltd<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Multi-Step Income Statement<\/strong><br><strong>For the Year Ended December 31, 2022<\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Sales Revenue:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sales Revenue: \\$1,500,000<\/li>\n\n\n\n<li>Less: Sales Returns and Allowances: (\\$1,485)<\/li>\n\n\n\n<li>Less: Sales Discounts: (\\$474)<br><strong>Net Sales:<\/strong> \\$1,498,041<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Cost of Goods Sold (COGS):<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Beginning Inventory: \\$1,750<\/li>\n\n\n\n<li>Add: Purchases: \\$100,145<\/li>\n\n\n\n<li>Add: Freight-In: \\$142<\/li>\n\n\n\n<li>Less: Purchase Discounts: (\\$455)<\/li>\n\n\n\n<li>Goods Available for Sale: \\$101,582<\/li>\n\n\n\n<li>Less: Ending Inventory: (\\$332)<br><strong>Cost of Goods Sold:<\/strong> \\$101,250<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Gross Profit:<\/strong> \\$1,498,041 \u2013 \\$101,250 = <strong>\\$1,396,791<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Operating Expenses:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Salaries Expense: \\$3,800<\/li>\n\n\n\n<li>Rent Expense: \\$7,550<\/li>\n\n\n\n<li>Advertising Expense: \\$18,500<\/li>\n\n\n\n<li>Depreciation Expense: \\$8,000<\/li>\n\n\n\n<li>Delivery Expense: \\$14,500<\/li>\n\n\n\n<li>Utilities Expense: \\$112<\/li>\n\n\n\n<li>Supplies Expense: \\$1,475<br><strong>Total Operating Expenses:<\/strong> \\$53,937<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Operating Income:<\/strong> \\$1,396,791 \u2013 \\$53,937 = <strong>\\$1,342,854<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Other Revenues and Expenses:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Interest Revenue: \\$2,200<\/li>\n\n\n\n<li>Less: Interest Expense: (\\$2,740)<br><strong>Net Other Expenses:<\/strong> (\\$540)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Income Before Tax:<\/strong> \\$1,342,854 \u2013 \\$540 = <strong>\\$1,342,314<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Income Tax Expense: (\\$7,580)<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Net Income:<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>\\$1,334,734<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation (300+ words):<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A <strong>multi-step income statement<\/strong> is structured to separate operating activities from non-operating ones and to highlight <strong>gross profit<\/strong>, <strong>operating income<\/strong>, and <strong>net income<\/strong> distinctly. This format provides more detail for evaluating the financial performance of a business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">We start by computing <strong>Net Sales<\/strong>, which is total sales minus any sales returns, allowances, and discounts. In this case:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Total Sales = \\$1,500,000<\/li>\n\n\n\n<li>Less Sales Returns and Allowances = \\$1,485<\/li>\n\n\n\n<li>Less Sales Discounts = \\$474<\/li>\n\n\n\n<li><strong>Net Sales = \\$1,498,041<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Next, we calculate the <strong>Cost of Goods Sold (COGS)<\/strong>. This includes the cost of inventory sold during the period. We begin with the <strong>beginning inventory<\/strong>, add <strong>purchases<\/strong>, and <strong>freight-in<\/strong>, subtract <strong>purchase discounts<\/strong>, then deduct the <strong>ending inventory<\/strong> to find the total cost of goods sold:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>COGS = Beginning Inventory + Purchases + Freight-in \u2013 Purchase Discounts \u2013 Ending Inventory<\/li>\n\n\n\n<li>= \\$1,750 + \\$100,145 + \\$142 \u2013 \\$455 \u2013 \\$332 = <strong>\\$101,250<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Gross Profit<\/strong> is the difference between Net Sales and COGS:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\\$1,498,041 \u2013 \\$101,250 = <strong>\\$1,396,791<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Then, we list <strong>operating expenses<\/strong>, which are all day-to-day costs like salaries, rent, advertising, and depreciation. Total operating expenses amount to <strong>\\$53,937<\/strong>, and subtracting this from gross profit gives <strong>Operating Income<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\\$1,396,791 \u2013 \\$53,937 = <strong>\\$1,342,854<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Under <strong>Other Revenues and Expenses<\/strong>, we include non-operating activities such as interest earned and interest paid. Subtracting net other expenses (\\$540) from operating income yields <strong>Income Before Tax<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>\\$1,342,854 \u2013 \\$540 = <strong>\\$1,342,314<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Finally, deducting <strong>Income Tax Expense<\/strong> of \\$7,580 results in a <strong>Net Income<\/strong> of:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>\\$1,334,734<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This format gives a clearer picture of business operations and profitability than a single-step income statement<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" src=\"https:\/\/learnexams.com\/blog\/wp-content\/uploads\/2025\/05\/image-67.png\" alt=\"\" class=\"wp-image-217781\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sales Revenue 1,500,000 2. Sales Returns and Allowances 1,485 3. Beginning Stock 1,750 4. Purchases 100,145 5. Salaries Expense 3,800 6. Rent Expense 7,550 7. Advertising Expense 18,500 8. Depreciation Expense 8,000 9. Delivery Expense 14,500 10. Utilities Expense 112 11. Supplies Expense 1,475 12. Sales Discount 474 13. Purchase Discount 455 14. Closing Stock [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-217780","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/217780","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=217780"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/217780\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=217780"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=217780"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=217780"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}