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1. Multiple-Step Income Statement

   On March 31, 2019, the balances of the accounts appearing in the ledger of Racine Furnishings Company, a furniture wholesaler, are as follows:

   Accumulated DepreciationBuilding	$780,750		Merchandise on hand (not sold) at the end of an accounting period.Merchandise Inventory	$983,900
   Expenses incurred in the administration or general operations of the business.Administrative Expenses	542,650		Notes Payable	250,150
   Building	2,606,100		Office Supplies	20,550
   Cash	174,350		Salaries Payable	8,150
   The cost that is reported as an expense when merchandise is sold.Cost of Merchandise Sold	3,894,550		The total amount charged to customers for merchandise sold, including cash sales and sales on account.Sales	6,690,150
   Interest Expense	10,200		Selling Expenses	707,700
   Kathy Melman, Capital	1,637,600		Store Supplies	86,500
   Kathy Melman, Drawing	171,100

   a. Prepare a multiple-step income statement for the year ended March 31, 2019.

   Racine Furnishings Company
   Income Statement
   For the Year Ended March 31, 2019
   Cash Interest expense Kathy Melman, Drawing Sales discounts Sales		$
   Building Cost of merchandise sold Interest expense Notes payable Office supplies
   Gross profit		$
   Expenses:
   Cost of merchandise sold Kathy Melman, capital Kathy Melman, drawing Sales discounts Selling expenses	$
   Administrative expenses Building Cash Office supplies Salaries payable
   Total expenses
   Income from operations Loss from operations		$
   Other expense:
   Cost of merchandise sold Interest expense Kathy Melman, drawing Sales Salaries payable
   Net income Net loss		$

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   b. What is a major advantage of the multiple-step income statement over the single-step income statement?

   • The multiple-step income statement clearly presents the value of total revenues.
   • The multiple-step income statement is less complex to prepare.
   • The multiple-step income statement shows the relationship of gross profit to sales.
   • The multiple-step income statement clearly presents the value of total expenses.

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