Problem - A Multiple-step Income Statement and Profit Margin
Refer to the list below of income statement items. Assume that Corbin Enterprises classifies all operating expenses into two categories: (1) selling and (2) general and administrative.
Advertising expense $ 9,000
Cost of goods sold 150,000
Depreciation expense-computer 4,500
Dividend revenue 2,700
Income tax expense 30,700
Interest expense 1,900
Rent expense-office 26,400
Rent expense-salesperson's car 18,000
Sales revenue 350,000
Supplies expense-office 1,300
Utilities expense 6,750
Wages expense-office 45,600
1. Prepare a multiple-step income statement for the year ended December 31, 2010
2. What advantages do you see in this form from the income statement?
3. Compute Corbin's profit margin
4. Comment on Corbin's profitability. What other factors need to be taken into account to assess Corbin's profitability?