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

Single-step Income Statement

Financial Accounting

4. Merchandising Operations

Single-step Income Statement

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Multiple Choice

Consider Adam’s single-step income statement. Which of the following shows how to calculate Adam’s net income?

Net Income = Operating Income + Other Income

Net Income = Total Assets − Total Liabilities

Net Income = Total Revenues − Total Expenses

Net Income = Gross Profit − Operating Expenses

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Verified step by step guidance

Step 1: Understand the concept of a single-step income statement. A single-step income statement simplifies the calculation of net income by subtracting total expenses from total revenues, without categorizing expenses into operating and non-operating sections.

Step 2: Identify the formula for net income in a single-step income statement. The correct formula is: Net Income = Total Revenues − Total Expenses.

Step 3: Clarify why other formulas provided in the problem are incorrect. For example, 'Net Income = Operating Income + Other Income' applies to a multi-step income statement, not a single-step income statement. Similarly, 'Net Income = Total Assets − Total Liabilities' is the formula for calculating equity, not net income.

Step 4: Recognize that 'Net Income = Gross Profit − Operating Expenses' is also incorrect because gross profit is used in multi-step income statements, not single-step income statements.

Step 5: Conclude that the correct formula for calculating net income in Adam’s single-step income statement is: Net Income = Total Revenues − Total Expenses.