Multiple Choice
Which of the following best describes the format of a single-step income statement for Armani Company for the year ended December 31?
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4. Merchandising Operations
Single-step Income Statement
Multiple Choice
Which of the following best describes the main characteristic of a single-step income statement?
A
It lists expenses by function, such as cost of goods sold and selling expenses.
B
It reports income tax expense before operating income.
C
It separates operating and non-operating activities, showing gross profit and operating income.
D
It groups all revenues together and all expenses together, subtracting total expenses from total revenues to determine net income.
Verified step by step guidance1
Understand the purpose of a single-step income statement: It is a simplified format of an income statement that does not separate operating and non-operating activities. Instead, it groups all revenues together and all expenses together.
Recognize the key characteristic: The single-step income statement calculates net income by subtracting total expenses from total revenues in one straightforward calculation.
Compare the options provided: Eliminate options that describe multi-step income statements, such as separating operating and non-operating activities or showing gross profit and operating income.
Focus on the correct description: Identify the option that states the grouping of all revenues and all expenses, which aligns with the single-step income statement's format.
Conclude that the correct answer is the option describing the grouping of all revenues and all expenses, subtracting total expenses from total revenues to determine net income.
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