problem 2 7 refer to the list of income statement items in problem 2 6 assume that s 500847

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