Which of the following best describes the format of a single-step income statement for Nero's for the year ended December 31?

• A. Operating revenues and operating expenses are separated from non-operating items, and gross profit is shown before operating expenses.
• B. Each revenue and expense is matched to its corresponding department, and net income is calculated for each department separately.
• C. Income tax expense is presented before operating income, and discontinued operations are excluded.
• D. All revenues are listed together, all expenses are listed together, and net income is calculated as total revenues minus total expenses.

Answer: (D)

Verified step by step guidance

1. Understand the concept of a single-step income statement: A single-step income statement is a simplified format where all revenues are grouped together, all expenses are grouped together, and net income is calculated as the difference between total revenues and total expenses.
2. Identify the key components of the single-step income statement: These include total revenues, total expenses, and net income. Unlike a multi-step income statement, it does not separate operating and non-operating items or show gross profit.
3. Review the problem statement and eliminate incorrect options: For example, the first option mentions separating operating and non-operating items and showing gross profit, which is characteristic of a multi-step income statement, not a single-step format.
4. Evaluate the correct answer: The correct description aligns with the single-step income statement format, where all revenues are listed together, all expenses are listed together, and net income is calculated as total revenues minus total expenses.
5. Summarize the reasoning: The single-step income statement is straightforward and does not involve departmental matching, presentation of income tax expense before operating income, or exclusion of discontinued operations. It focuses solely on grouping revenues and expenses to calculate net income.