Chapter 2: Q9BP (page 49)

Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.
Sales
1,360,000
Shares outstanding
104,000
Cost of goods sold
700,000
Interest expenses
34,000
Selling and administration expenses
49,000
Depreciation expenses
23,000
Preferred stock dividend
86,000
Taxes
100,000

Short Answer

Expert verified

The earning per share is $3.54.

Step by step solution

Indirect expense

Indirect expense means the expense incurred by the company that is not directly related to the production of the goods.It includes the personnel cost, electricity expense, etc.

Income statement for Virginia Slim Wear

Particulars	Amount ($)
Sales	1,360,000
Less: Cost of goods sold	700,000
Gross profit	660,000
Less: Selling and administrative expenses	49,000
Less: Depreciation expenses	23,000
Less: Interest expenses	34,000
Operating income	554,000
Less:Taxes	100,000
Net income after tax	454,000
Less: Preferred stock dividend	86,000
Income available for shareholders	368,000
No. of shares outstanding	104,000
Earnings per share	3.54

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Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

Times mirror and glass company
Sales	\)126,000
Less: Cost of goods sold	93,000
Gross profit	\(33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\)18,000
Less: Interest expenses	3,000
Earning before taxes	\(15,000
Less: Taxes (30%)	4,500
Earning after taxes	\)10,500

Short Answer

Step by step solution

Indirect expense

Income statement for Virginia Slim Wear

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Sales	1,360,000
Shares outstanding	104,000
Cost of goods sold	700,000
Interest expenses	34,000
Selling and administration expenses	49,000
Depreciation expenses	23,000
Preferred stock dividend	86,000
Taxes	100,000

Selling and administrative expenses	$328,000
Depreciation expenses	195,000
Sales	1,660,000
Interest expenses	129,000
Cost of goods sold	560,000
Taxes	171,000