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?

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

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

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

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

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Verified step by step guidance

Understand the structure of a multi-step income statement, which is designed to provide detailed information about a company's financial performance by breaking down revenues and expenses into specific categories.

Recognize that the first subtotal on a multi-step income statement is 'Gross Profit,' calculated as Revenue minus Cost of Goods Sold (COGS). This represents the profit from core business operations before deducting operating expenses.

Identify that the next subtotal is 'Operating Income,' which is derived by subtracting Operating Expenses (such as selling, general, and administrative expenses) from Gross Profit. This reflects the profit from normal business operations before considering non-operating items.

Understand that 'Income Before Taxes' is the next subtotal, calculated by adding or subtracting non-operating items (such as interest income or expense) to/from Operating Income. This represents the profit before accounting for income tax expenses.

Finally, recognize that 'Net Income' is the last subtotal, calculated by subtracting Income Tax Expense from Income Before Taxes. This represents the company's overall profitability for the period.