Question 1

Company XYZ had the following information during 2020:

1.Beginning inventory was $50,000. Purchases of inventory was $20,000. Ending inventory was 35% of beginning inventory at the end of the year.

2.Cash on hand was $325,000.

3.Sales revenue was $225,000.

4.Operating expenses were half of cost of goods sold.

5.Income tax rate was 20%.

Prepare a income statement for 2020 using the (1) single-step approach and (2) multiple-step approach. What are the advantages and disadvantages of each?