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29 December, 17:44

Save-the-Earth Co. reports the following income statement accounts for the year ended December 31. Sales discounts $ 890 Office salaries expense 3,400 Rent expense-Office space 2,900 Advertising expense 780 Sales returns and allowances 390 Office supplies expense 780 Cost of goods sold 11,800 Sales 48,000 Insurance expense 2,400 Sales staff salaries 3,900 Required: Prepare a multiple-step income statement for the year ended December 31.

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  1. 29 December, 21:34
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    Multiple-step income statement for the year ended December 31.

    Sales 48,000

    Less Sales returns and allowances 390

    Net Sales 47,610

    Less Cost of goods sold (11,800)

    Gross Profit 35,810

    Less Operating Expenses:

    Sales discounts 890

    Office salaries expense 3,400

    Rent expense-Office space 2,900

    Advertising expense 780

    Office supplies expense 780

    Insurance expense 2,400

    Sales staff salaries 3,900 (15,050)

    Operating Income / (Loss) 20,760

    Explanation:

    The multiple-step income statement shows separately profit derived from Primary Activities of an Entity (Operating Profit) and the profit that includes Secondary Activities of an Entity (Net Profit)

    In this case, Save-the-Earth Co derived its profit only from Primary Activities.
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