Question

Indicate the section of a multiple-step income statement in which each of the following is shown.

(a) Loss on inventory write-down.

(b) Loss from strike.

(c) Bad debt expense.

(d) Loss on disposal of a discontinued operation.

(e) Gain on sale of machinery.

(f) Interest revenue.

(g) Depreciation expense.

(h) Material write-offs of notes receivable.

Short answer

The various items in the income statement are shown on the basis of their association with the operational and non-operational activities and are bifurcated accordingly.

Step-by-step solution

Meaning of Multi-Step Income Statement

As the name suggests, the multi-step income statement contains different sections. It categorizes revenues and associated expenses in operating and non-operating units for a better understanding.

Reporting of various items of the multi-step income statement

Serial No.	Section	Explanation
(a)	Extraordinary section	Loss on inventory write-down is non-recurring; hence should be shown as an extraordinary loss.
(b)	Extraordinary section	A strike is a non-operational activity; hence respective loss should be reported under the extraordinary section.
(c)	Operation section	Bad debts are part of operating activities; hence related expenses should be reported as operating expenses.
(d)	Discontinued operations section	Loss belongs to discontinued operations should be shown separately in the discontinued operation section.
(e)	Extraordinary section	Gain on sale of an assetis non-operating activity; hence the same should be reported as an extraordinary gain.
(f)	Operating section	Interest revenues are part of business operations; therefore should be reported in the operating section.
(g)	Operating section	Depreciation belongs to business operations; hence should be reported as an operating expense.
(h)	Operating section	Writing off materials linked with notes receivable are associated with business operations; hence should be reported under the operating section.