Multiple Choice
Which of the following correctly fills in the blanks: 'The two general approaches for preparing an income statement are the _____-step and _____-step approaches'?
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4. Merchandising Operations
Single-step Income Statement
Multiple Choice
Which of the following items are typically found on a single-step income statement?
A
Comprehensive income and accumulated other comprehensive income
B
Total revenues and total expenses
C
Gross profit and operating income
D
Earnings per share and retained earnings
Verified step by step guidance1
Understand the purpose of a single-step income statement: It is a simplified format that reports total revenues and total expenses to calculate net income, without breaking down categories like gross profit or operating income.
Review the components typically included in a single-step income statement: Focus on total revenues and total expenses, as these are the key elements used to determine net income.
Clarify why comprehensive income and accumulated other comprehensive income are not included: These items are part of the statement of comprehensive income, not the single-step income statement.
Explain why gross profit and operating income are excluded: These are detailed line items found in a multi-step income statement, not a single-step format.
Discuss why earnings per share and retained earnings are not part of the single-step income statement: Earnings per share is disclosed separately, often at the bottom of the income statement, and retained earnings are part of the statement of retained earnings or balance sheet.
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