Where on a single-step income statement is income tax expense reported?

• A. Reported as a footnote and not on the face of the income statement
• B. Included within total expenses, not shown separately
• C. After total revenues and total expenses, as a separate line item before net income
• D. At the top of the income statement, before revenues

Answer: (C)

Verified step by step guidance

1. Understand the structure of a single-step income statement: A single-step income statement groups all revenues together and all expenses together, with a single subtraction to determine net income. It does not categorize expenses into operating and non-operating sections.
2. Identify where income tax expense is reported: In a single-step income statement, income tax expense is shown as a separate line item after total revenues and total expenses have been calculated.
3. Clarify why income tax expense is not included within total expenses: Income tax expense is not grouped with other expenses because it is calculated based on taxable income, which is determined after all other revenues and expenses are accounted for.
4. Note the placement of income tax expense: It is reported just before the calculation of net income, ensuring that the net income figure reflects the deduction of income tax expense.
5. Reinforce the correct placement: Income tax expense is not reported as a footnote, within total expenses, or at the top of the income statement. It is always shown as a separate line item before net income in a single-step income statement.