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Presented below is information related to Viel Company at 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 available-for-sale investments \(10,000

Interest expense \)6,000

Loss on discontinued operations \(12,000

Dividends declared and paid \)5,000

Instructions

Compute the following: (a) income from operations, (b) net income, (c) comprehensive income, and (d) retained earnings balance at December 31, 2017. (Ignore income tax effects.)

Step by step solution

01

Meaning of Net Income

Net income refers to the total income minus all operating expenses, interest expenses, selling and other expenses, and depreciation expenses. The amount is treated as net income for an individual or company.

02

Preparation of Income Statement

Viel Company
Income Statement
For the Year Ended December 31, 2017
Sales Revenue	$310,000
Less: Cost of Goods Sold	($140,000)
Gross Profits	$170,000
Less: Selling and Administrative expenses	($50,000)
Income From Operations	$120,000 (A)
Other Income and Expenses
Add: Gain on sale of plant assets	$30,000
Total Income	$150,000
Less: Financing Costs	$6,000
Income from Continued Operations	$144,000
Less: Loss on discontinued operations	($12,000)
Net Income	$132,000 (B)
Add: Unrealized gain on available for sale securities	$10,000
Comprehensive Income	$142,000 (C)
Retained earnings as of December 31, 2017
Net Income	$132,000
Less: Dividends declared and paid	$5,000
Retained Earnings as of December 31, 2017	$127,000 (D)

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