Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Multi-step Income Statement

Financial Accounting

4. Merchandising Operations

Multi-step Income Statement

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Multiple Choice

Which of the following correctly lists the order of the main subtotals that appear on a multi-step income statement?

Net Income, Gross Profit, Operating Income, Income Before Taxes

Operating Income, Gross Profit, Net Income, Income Before Taxes

Gross Profit, Operating Income, Income Before Taxes, Net Income

Income Before Taxes, Gross Profit, Net Income, Operating Income

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Verified step by step guidance

Step 1: Understand the structure of a multi-step income statement. A multi-step income statement separates operating revenues and expenses from non-operating items, providing a detailed view of a company's financial performance.

Step 2: Identify the key subtotals in the multi-step income statement. These subtotals typically include Gross Profit, Operating Income, Income Before Taxes, and Net Income.

Step 3: Define each subtotal: Gross Profit is calculated as Sales Revenue minus Cost of Goods Sold (COGS). Operating Income is derived by subtracting operating expenses from Gross Profit. Income Before Taxes includes non-operating items like interest and gains/losses, and Net Income is the final profit after deducting taxes.

Step 4: Recognize the correct order of these subtotals. The sequence is logical: Gross Profit comes first as it represents the initial profitability from sales. Operating Income follows, showing profitability from core operations. Income Before Taxes accounts for all revenues and expenses, and Net Income is the final result after taxes.

Step 5: Match the correct order provided in the problem to the explanation above. The correct order is: Gross Profit, Operating Income, Income Before Taxes, Net Income.