Wheel Company has the following balances at December 31, 2015: Retained earnings, December 31, 2014- 30,000 Cost of goods sold- 56,000 Depreciation expense- 1,450 Dividends- 8,000 Income tax expense- 2,000 Interest expense- 1,050 Rent expense- 1,700 Sales- 68,000 Wage expense- 6,800 Prepare a multiple-step income statement for the year ended December 31, 2015. Solution Answer: Wages expenses are already included in COGS. Dividends on common stock are not reported on the income statement since they are not expenses. .

1. Wheel Company has the following balances at December 31, 2015:
Retained earnings, December 31, 2014- 30,000
Cost of goods sold- 56,000
Depreciation expense- 1,450
Dividends- 8,000
Income tax expense- 2,000
Interest expense- 1,050
Rent expense- 1,700
Sales- 68,000
Wage expense- 6,800
Prepare a multiple-step income statement for the year ended December 31, 2015.
Solution
Answer:
Wages expenses are already included in COGS.
Dividends on common stock are not reported on the income statement since they are not
expenses.
Particulars Amount ($)
Sales Revenue 68000
Less: COGS 56000

2. Gross profit 12000
Operating expenses
Administrative expenses:
Depreciation expense 1450
Other expenses and losses
Rent expense 1700
Interest expense 1050
Income before income tax 7800
Income tax 2000
Net income 5800