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...

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 current year.

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:

The following income statement items, arranged in alphabetical order, are taken from the records of Shaw Corporation for the current year:

Required

1. Prepare a single-step income statement for the current year.

2. What weaknesses do you see in this form for the income statement?