Multi-Step Income Statement for Cool Corp
For the year ended December 31, 2018, Cool Corp's multi-step income statement is structured to provide a detailed view of the company's financial performance. The statement begins with sales revenue, which is the total income generated from sales before any deductions.
Sales Revenue: $443,000
Less: Sales Discounts: $23,000
Net Sales Revenue: $420,000
Next, we calculate the cost of goods sold (COGS), which represents the direct costs attributable to the production of the goods sold by the company.
Cost of Goods Sold: $136,000
Gross Profit: Net Sales Revenue - COGS = $420,000 - $136,000 = $284,000
Following the gross profit, we list the operating expenses, which are the costs required to run the business that are not directly tied to the production of goods.
Operating Expenses:
- Payroll Expense: $75,000
- Rent Expense: $36,000
- General and Administrative Expenses: $58,000
Total Operating Expenses: $75,000 + $36,000 + $58,000 = $169,000
Now, we calculate the income from operations, which reflects the profit generated from the core business activities.
Income from Operations: Gross Profit - Total Operating Expenses = $284,000 - $169,000 = $115,000
Next, we account for other revenues and gains, as well as other expenses. This includes any income generated from non-operating activities.
Other Revenues and Gains:
- Gain on Sale of Land: $9,000
Other Expenses:
- Interest Expense: $4,000
We then calculate the income before income taxes, which summarizes the total income before tax obligations are deducted.
Income Before Income Taxes: Income from Operations + Other Revenues - Other Expenses = $115,000 + $9,000 - $4,000 = $120,000
To determine the income tax expense, we apply the tax rate to the income before taxes.
Income Tax Expense: Income Before Income Taxes × Tax Rate = $120,000 × 0.40 = $48,000
Finally, we arrive at the net income, which represents the company's total profit after all expenses, including taxes, have been deducted.
Net Income: Income Before Income Taxes - Income Tax Expense = $120,000 - $48,000 = $72,000
This multi-step income statement provides a comprehensive overview of Cool Corp's financial performance, highlighting key components such as net sales, gross profit, operating expenses, and net income.
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