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.

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.