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Chapter 4: Question 2BE (page 181)

Brisky Corporation had net sales of \(2,400,000 and interest revenue of \)31,000 during 2017. Expenses for 2017 were cost of goods sold \(1,450,000, administrative expenses \)212,000, selling expenses \(280,000, and interest expense \)45,000. Brisky’s tax rate is 30%. The corporation had 100,000 shares of common stock authorized and 70,000 shares issued and outstanding during 2017. Prepare a single-step income statement for the year ended December 31, 2017.

Short Answer

Expert verified

The Earning per share is $4.44.

Step by step solution

01

Meaning of Sales

Sales refer to the transactions where one party provides products, services, and assets in return for money.

02

Preparing Single-step income statement for Brisky Corporation

Brisky Corporation
Income Statement
For the year ended December 31, 2017

Revenues

Net Sales

$2,400,000

Interest Revenue

$31,000

Total Revenues (A)

$2,431,000

Expenses

Cost of Goods Sold

$1,450,000

Selling Expenses

$280,000

Administrative Expenses

$212,000

Interest Expense

$45,000

Income Tax Expense

$133,200

Total Expenses (B)

$2,120,200

Net Income (A-B)

$310,800

Earnings per Share

$4.44

Working Notes:

  1. Calculation of Income Tax Expense

NetIncomeExpense=(TotalRevenue-COGS-SellingExpense-AdministartionExpense-InterestExpense)×Taxrate=($2,431,000-$1,450,000-$280,000-$212,000-$45,000)×30%=$133,200

Calculation of Earnings per share (EPS)

EarningPershare=NetIncomeOutstandingCommonStock=$310,80070,000Shares=$4.44

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Most popular questions from this chapter

Distinguish between the modified all-inclusive income statement and the current operating performance income statement. According to present generally accepted accounting principles, which is recommended? Explain.

(Multiple-Step Statement) The following balances were taken from the books of Alonzo Corp. on December 31, 2017.

Interest revenue \(86,000 Accumulated depreciation equipment \)40,000

Cash \(51,000 Accumulated depreciation—buildings \)28,000

Sales revenue \(1,380,000 Notes receivable \)155,000

Accounts receivable \(150,000 Selling expenses \)194,000

Prepaid insurance \(20,000 Accounts payable \)170,000

Sales returns and allowances \(150,000 Bonds payable \)100,000

Allowance for doubtful accounts \(7,000 Administrative and general expense \)97,000

Sales discounts \(45,000 Accrued liabilities \)32,000

Land \(100,000 Interest expense \)60,000

Equipment \(200,000 Notes payable \)100,000

Buildings \(140,000 Loss from earthquake damage \)150,000

Cost of goods sold \(621,000 Common stock \)500,000

Retained earnings $21,000

Assume the total effective tax rate on all items is 34%.

Instructions

Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.

Presented below is information related to Viel Company on December 31, 2017, the end of its first year of operations.

Sales revenue $310,000

Cost of goods sold 140,000

Selling and administrative expenses 50,000

Gain on sale of plant assets 30,000

Unrealized gain on non-trading equity securities 10,000

Interest expense 6,000

Loss on discontinued operations 12,000

Allocation to non-controlling interest 40,000

Dividends declared and paid 5,000

Instructions

Compute the following: (a) income from operations, (b) net income, (c) net income attributable to Viel Company controlling shareholders, (d) comprehensive income, and (e) retained earnings balance on December 31, 2017. (Ignore income taxes.)

Charlie Brown, the controller for Kelly Corporation, is preparing the company’s income statement at year-end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses cannot be reported as an unusual item. He also does not want to highlight it as a material loss since he feels that will reflect poorly on him and the company. He reasons that if the company had recorded more depreciation during the assets’ lives, the losses would not be so great. Since depreciation is included among the company’s operating expenses, he wants to report the losses along with the company’s expenses, where he hopes it will not be noticed.

Instructions

  1. What are the ethical issues involved?
  2. What should Brown do?

Starr Co. had sales revenue of \(540,000 in 2017. Other items recorded during the year were:

Cost of goods sold \)330,000

Salaries and wages expense 120,000

Income tax expense 25,000

Increase in value of company reputation 15,000

Other operating expenses 10,000

Unrealized gain on value of patents 20,000

Prepare a single-step income statement for Starr for 2017. Starr has 100,000 shares of stock outstanding.
See all solutions

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