I need to prepare a multi step income statement... I'm having way too much trouble figuring out what is an operating expense and what are other expenses and where retained earnings go... can anyone help me? - here is the adjusted trial balance http://i52.tinypic.com/2dbknjo.png

Here is what I have so far

Sales $948,000
Less Sales returns & allowances (10,000)
Net Sales $938,000
Cogs $280,000 (figured it out by using finished goods, etc)
Gross profit = $658,000
Here is where I'm having trouble
Operating expenses
Prepaid insurance $2,000
General & Admin expenses $170,500

I'm not sure what else to put and where to put retained earnings, bonds payable, etc... can someone help? Thank you. I already used the raw materials, labor, etc to calculate COGM which I used to calculate COGS so I already have that out of the way but the rest I'm really confused on.. thanks.

Prepaid insurance, retained earnings, and bonds payable do not go on an income statement. They are balance sheet accounts.

For prepaid insurance you will have to compute the amount of insurance used during the period, which will be your insurance expense for the period and this will appear on the income statement.

For bonds payable you will have to compute the interest expense for the period, which will be your interest expens and this will appear on the income statement.

The net income from the income statement will transfer to retained earnings on the balance sheet.