On August 31, 2008, the balances of the accounts appearing in the ledger of The Bent Needle Company, a furniture wholesaler, are as follows:
Administrative Expenses $125,000 Notes Payable $ 25,000
Building 512,500 Office Supplies 10,600
Cash 48,500 Salaries Payable 3,220
Cost of Merchandise Sold 700,000 Sales 1,275,000
Interest Expense 7,500 Sales Discounts 20,000
Jason Ritchie, Capital 568,580 Sales Returns and Allowances 80,000
Jason Ritchie, Drawing 25,000 Selling Expenses 205,000
Merchandise Inventory 130,000 Store Supplies 7,700
a. Prepare a multiple-step income statement for the year ended August 31, 2008.
b. Compare the major advantages and disadvantages of the multiple-step and single-step forms of income statements.