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

• A. It is included in total expenses and deducted from total revenues to determine net income.
• B. It is reported separately after operating income.
• C. It is deducted from total revenues to arrive at net income.
• D. It is not reported on the single-step income statement.

Answer: (A)

Verified step by step guidance

1. Understand the structure of a single-step income statement: In this format, all revenues are grouped together, and all expenses are grouped together. Net income is calculated by subtracting total expenses from total revenues.
2. Recognize that income tax expense is considered part of total expenses in a single-step income statement. It is not reported separately after operating income, as operating income is not a specific line item in this format.
3. Note that income tax expense is included in the total expenses category and contributes to the deduction from total revenues to determine net income.
4. Clarify that the single-step income statement does not separate income tax expense as a distinct line item or exclude it from the statement entirely. It is integrated into the total expenses.
5. Conclude that income tax expense is reported as part of total expenses and deducted from total revenues to arrive at net income in a single-step income statement.