E4-5B (Multiple-step and Single-step)

E4-5B (Multiple-step and Single-step) Two accountants for the accounting firm of Pham and Pun
are arguing about the merits of presenting an income statement in a multiple-step versus a singlestep
format. The discussion involves the following 2014 information related to Saghir Company ($000
omitted).

Administrative expense
Officers’ salaries $ 6,860
Depreciation of office furniture and equipment 5,544
Cost of goods sold 84,798
Rental revenue 24,122
Selling expense
Transportation-out 3,766
Sales commissions 11,172
Depreciation of sales equipment 9,072
Sales 135,100
Income tax 12,698
Interest expense 2,604
Instructions
(a) Prepare an income statement for the year 2014 using the multiple-step form. Common shares outstanding
for 2014 total 40,550 (000 omitted).
(b) Prepare an income statement for the year 2014 using the single-step form.
(c) Which one do you prefer? Discuss.