Problem 2-7 Refer to the list of income statement items in Problem 2-6. Assume that Shaw Corporation classifies all operating expenses into two categories:

Refer to the list of income statement items in Problem 2-6. Assume that Shaw Corporation classifies all operating expenses into two categories: (1) selling and (2) general and administrative.

Required

1.  Prepare a multiple-step income statement for the year ended December 31, 2012.

2.  What advantages do you see in this form for the income statement?

3.  Compute Shaw’s profit margin. 

4.  Comment on Shaw’s profitability. What other factors need to be taken into account to assess shaw's profitability?

Problem 2-6  Income Statement Data

The following income statement items, arranged in alphabetical order, are taken from the records

of Shaw Corporation for the year ended December 31, 2012:

Advertising expense      $ 1,500                        Interest expense            $ 1,400

Commissions expense  2,415                           Interest revenue                            1,340

Cost of goods sold       29,200                          Rent revenue                    6,700

Depreciation expense—office building 2,900      Salaries and wages  expense—office 12,560

Income tax expense 1,540                                 Sales revenue                  48,300

Insurance expense—salesperson’s auto 2,250    Supplies expense—office      890