Problem 2-7 refer to the list of income statement items in problem
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.
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
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