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Ch(6): Income Statement for Merchandise Business125Multiple -Step Income Statement:The multiple step income statement is so named because it Shows several steps in determining net income. Two of these steps relate to the company%u2019s principal operating activities. A multiple step also distinguishes between operating and non-operating activities. The statement has three main parts: (1) gross profit, determined by net sales less cost of goods sold. (2) income from operations, determined by gross profit less operating expenses. (3) net income, determinedbyincome from operations adjusted for non-operating items.A-Computing of Net Income:1-Net Sales = Sales %u2013(SalesReturns + Sales Discount)2-Gross Profit = Net Sales %u2013Cost of Goods Sold.3-Income from Operations = Gross Profit %u2013Operations Expenses.4-Net income(Loss) = Incomefrom Operations + (Other Revenues and Gains)-(Other Expenses and Losses).BCDEOperating Expenses:Objective (2)Explain the computation and importance of net profit under a multiple %u2013step income statement.SalesSales Returns +Sales discountNet salesCost of Goods SoldGross ProfitIncome from OperationsOther Revenues and GainsOther Expenses and LossesOperation Expenses123Net Income(Loss)45Income Before Tax(Tax6