Question: A Preparing an income statement

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

Learning Objective 5

Net Income \(65,500

Selling Expenses

Administrative Expenses

Income from Discontinued Operations

Cost of Goods Sold

Treasury Stock—Common (5,000 shares)

Net Sales Revenue

\) 110,000

115,000

2,500

510,000

75,000

819,000

Common Stock, \(12 Par Value,

10,000 shares authorized and issued \) 120,000

Preferred Stock, $7 No-Par Value,

7,000 shares issued 490,000

Income Tax Expense: Continuing

Operations 20,000

Income Tax Expense: Income from

Discontinued Operations 1,000

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

Short Answer

Expert verified

Answer

A multi-step income statement for the fiscal year ended November 30, 2018 shows net income $65,500 and earnings per share is $3.30.

Step by step solution

01

Basic calculations

IncomefromDiscountinuedOperationsLessApplicableTax=IncomefromDiscountinuedOperations-IncomeTaxExpnses=$2,500-$1,000=$1,500

02

 Step 2: Multi-step income statement-


Income Statement

November 30, 2018

Net Sales Revenue

$819,000

Cost of goods sold

$510,000

Gross Profit

$309,000

Less: Operating Expenses-

Selling Expenses

($110,000)

Administrative Expenses

($115,000)

Operating Income

$84,000

Less: Income Tax Expense: Continuing Operations

($20,000)

Income from Continuing Operations

$64,000

Income from Discontinued Operations less applicable tax

$1,500

Net Income

$65,500

Less: Preferred dividend (7,000 * $7)

($49,000)

  1. Earnings available

$16,500

  1. No of equity shares issued and outstanding (10,000 – 5,000)

5,000

Earnings per share (a/b)

$3.30

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