episode 10 exercise 01

Part 1

In this section, you'll find a number of questions and activities. After you've made your selections, click on the "How did I do?" button to view the correct answers and explanations for the questions.

Apply what you have learned about how CanGo's growth has affected its use of income statements to the following questions.

1.	The Net Income CanGo shows on a single-step income statement will be different than what would be shown on a multiple-step income statement.


2.	As CanGo grows in size and complexity, it must use a multiple-step income statement.


3.	In the past, when CanGo sold only books, Gross Margin on its income statement was equal to Sales minus Cost of Books Sold.


4.	CanGo has at times rented empty office space to occasional short-term tenants. The prepaid rent from this activity would be included in the Other Revenues section of a multiple-step income statement, while for an office building rental company, it would be shown as part of regular revenue.


5.	All companies include the same items in Other Revenues and Expenses if they use such a category.


6.	A service firm, that is, a firm that doesn't sell a physical product, would never use a multiple-step income statement.

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