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Chapter 13: 34_E (page 716)

Preparing a multi-step income statement

Clix Photographic Supplies, Inc.’s accounting records include the following for 2018:

Income Tax Savings—Loss on

Discontinued Operations

\( 12,000 Net Sales \) 525,000

Operating Expenses

(Including Income Tax)

100,000

Loss on Discontinued Operations 30,000

Cost of Goods Sold 240,000

Prepare Clix’s multi-step income statement for the year ending December 31, 2018. Omit earnings per share.

Short Answer

Expert verified

Net income of the company is $143,000 at the year ending on December 31, 2018.

Step by step solution

01

Basic Introduction

Income statement is a financial statement that helps stakeholders in analysing the financial performance of a corporation. It includes all the revenue and expenses of a corporation and determines the net income or net loss st the end of the financial year.

02

Multi- step Income Statement

Income Statement

Dec 31, 2018

Net Sales

$525,000

Cost of Goods Sold

($240,000)

Gross profit

$285,000

Less: Operating Expenses

($100,000)

Income continued operations

$185,000

Less: Income Tax Savings—Loss on Discontinued Operations

($12,000)

Less: Loss on Discontinued Operations

($30,000)

Net Income

$143,000

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Most popular questions from this chapter

Question: Organizing a corporation and issuing stock

Jimmy and Randy are opening a comic store. There are no competing comic stores in the area. They must decide how to organize the business. They anticipate profits of \(550,000 the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.

Requirements

3. If they decide to issue \)3 par common stock and anticipate an initial market price of \(75 per share, how many shares will they need to issue to raise \)3,000,000?

Journalizing a stock dividend and reporting stockholders’ equity

The stockholders’ equity of Lakeside Occupational Therapy, Inc. on December 31, 2017, follows:

Common Stock—\(1 Par Value; 1,200 shares

authorized, 400 shares issued and outstanding

Paid-In Capital:

120,000

400

2,000

Retained Earnings

Total Stockholders’ Equity \) 122,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 1,600

Total Paid-In Capital

\(

On April 30, 2018, the market price of Lakeside’s common stock was \)16 per share and the company declared a 13% stock dividend. The stock was distributed on May 15.

Requirements

1. Journalize the declaration and distribution of the stock dividend.

Preparing an income statement

The following information was taken from the records of Arizona Motorsports, Inc. at November 30, 2018:

Learning Objectives 3, 4

1. Nov. 8 Treasury Stock \(36,000

Learning Objective 5

Net Income \)37,840

Selling Expenses

Administrative Expenses

Income from Discontinued Operations

Cost of Goods Sold

Treasury Stock—Common (1,500 shares)

Net Sales Revenue

\( 95,000

150,000

2,400

470,000

19,500

801,400

Common Stock, \)11 Par Value, 13,500

shares authorized and issued \( 148,500

Preferred Stock, \)2 No-Par Value, 2,000

shares issued 60,000

Income Tax Expense: Continuing

Operations 50,000

Income Tax Expense: Income from

Discontinued Operations 960

Prepare a multi-step income statement for Arizona Motorsports for the fiscal year ended November 30, 2018. Include earnings per share

On August 1, Hagino Corporation declared a $1.50 per share cash dividend on its common stock (20,000 shares) for stockholders on record as of August 15. Hagino paid the dividend on August 31. Journalize the entries declaring the cash dividend and paying the dividend.

Accounting for a stock split

Decor and More Imports recently reported the following stockholders’ equity:

Common Stock—\(1 Par Value; 490,000,000 shares

authorized, 119,000,000 shares issued and outstanding

Paid-In Capital:

654,000,000

\) 119,000,000

267,000,000

Retained Earnings

Total Stockholders’ Equity \( 921,000,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 148,000,000

Total Paid-In Capital

Suppose Decor and More split its common stock 2-for-1 in order to decrease the market price per share of its stock. The company’s stock was trading at \)17 per share immediately before the split.

Requirements

1. Prepare the stockholders’ equity section of the Decor and More Imports balance sheet after the stock split.
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