The information below pertains to the operations of Montreal Retail Corporation for the year ended 31 December 20X6:

Cost of merchandise sold ……………………………………….     $ 102,000

Inventory warehousing cost……………………………………….       20,000

Accounts payable …………………………………………………           120,000

Sales revenue …………………………………………………….             525,000

Accumulated depreciation ……………………………………….      140,000

Sales returns ………………………………………………………                 5,000

Unearned revenue ……………………………………………….               2,000

Depreciation expense ………………………………………………        50,000

Rent revenue ……………………………………………………..                 4,000

Employee wages, salaries, and benefits………………………   100,000

Interest expense …………………………………………………                6,000

Investment revenue ………………………………………………             3,000

Loss on disposal of geographic segment ………………………  30,000

Earnings from discontinued geographic segment…………   20,000

Distribution expenses …………………………………………..         106,000

General and administrative expenses…………………………     46,000

Loss on sale of noncurrent assets………………………………      13,000

Income tax expense ? Fire loss ……………………………………    20,000

Additional information: 

• Functional costs do not include depreciation or employee costs.

• Depreciation expense pertains 50% to warehousing cost, 30% to administrative costs, and 20% to distribution expense.

• Employee wages, salaries, and benefits pertain 20% to warehousing and merchandising, 50% to administrative costs, and 30% to distribution expense.

• The company’s income tax rate is 20%. Assume that the tax rate pertains to all elements of revenue, expense, gain, and loss.

Required: 

1. Prepare an income statement on a functional basis, in a single- step format.

2. Prepare an income statement on the basis of nature of expense, using a multiple- step format.