Prepare an income statement for the year 2014 starting with income from continuing operations...
Question:
Prepare an income statement for the year 2014 starting with income from continuing operations before taxes.
Compute earnings per share as it should be shown on the face of the income statement. Common shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items, unless indicated otherwise.)
P4-4 (Multiple- and Single-Step Income, Retained Earnings)
The following account balances were included in the trial balance of Twain Corporation at June 30, 2014.
| Sales revenue | $1,578,500 |
| Depreciation expense (office Sales discounts 31,150 furniture and equipment) | $ 7,250 |
| Cost of goods sold | 896,770 |
| Property tax expense | 7,320 |
| Salaries and wages expense (sales) 5 | 6,260 |
| Bad debt expense (selling) | 4,850 |
| Sales commissions | 97,600 |
| Maintenance and repairs | |
| Travel expense (salespersons) | 28,930 |
| expense (administration) | 9,130 |
| Delivery expense | 21,400 |
| Office expense | 6,000 |
| Entertainment expense | 14,820 |
| Sales returns and allowances | 62,300 |
| Telephone and Internet expense (sales) | 9,030 |
| Dividends received | 38,000 |
| Depreciation expense (sales equipment) | 4,980 |
| Interest expense | 18,000 |
| Maintenance and repairs expense (sales) | 6,200 |
| Income tax expense | 102,000 |
| Miscellaneous selling expenses | 4,715 |
| Depreciation understatement | |
| Office supplies used | 3,450 |
| due to error?2011 (net of tax) | 17,700 |
| Telephone and Internet expense | |
| Dividends declared on (administration) | 2,820 |
| Preferred stock | 9,000 |
| Dividends declared on common stock | 37,000 |
The Retained Earnings account had a balance of $337,000 at July 1, 2013. There are 80,000 shares of common stock outstanding.
Instructions
(a) Using the multiple-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2014.
(b) Using the single-step form, prepare an income statement and a retained earnings statement for the year ended June 30, 2014.
Multistep Income Statement:
The income statement is prepared to calculate the profitability of the business. The multistep income statement is a comprehensive calculation of the net income. In this statement first gross profit is calculated, then after deducting operating expenses from the gross profit, we get operating profit. After that interest expense and taxes are deducted to get the value of net income.
Answer and Explanation: 1
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View this answerAnswer (a):
Multiple Steps
| Details | Amount ($) | Amount ($) |
|---|---|---|
| Sales revenue | 1,578,500 | |
| Sales returns and allowances | 62,300 | |
| Net Sales | 1,516,200 | |
| Less Cost of... |
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Chapter 8 / Lesson 5An income statement demonstrates the company's income and expenses over a given timeframe, used to reflect performance. Learn the operations of income statements in multi vs single-steps and the details of the line items they use.