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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鈥檚 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)脳Taxrate=($2,431,000-$1,450,000-$280,000-$212,000-$45,000)脳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

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.)

Tim Mattke Company began operations in 2015 and for simplicity reasons, adopted weighted-average pricing for inventory. In 2017, in accordance with other companies in its industry, Mattke changed its inventory pricing to FIFO. The pretax income data is reported below.

Year Weighted Average FIFO

2015 \(370,000 \)395,000

2016 390,000 \(430,000

2017 410,000 \)450,000

Instructions

  1. What is Mattke鈥檚 net income in 2017? Assume a 35% tax rate in all years.
  2. Compute the cumulative effect of the change in accounting principle from weighted-average to FIFO inventory pricing.

Show comparative income statements for Tim Mattke Company, beginning with income before income tax, as presented on the 2017 income statement.

The following information was taken from the records of Roland Carlson Inc. for the year 2017: income tax applicable to income from continuing operations \(187,000, income tax applicable to loss on discontinued operations \)25,500, and unrealized holding gain on available-for-sale securities (net of tax) \(15,000.

Gain on sale of equipment \)95,000 Cash dividends declared $150,000

Loss on discontinued operations75,000 Retained earnings January1,2017 600,000

Administrative expenses 240,000 Cost of goods sold 850,000

Rent revenue 40,000 Selling expenses 300,000

Loss on write-down of inventory 60,000 Sales revenue 1,900,000

Shares outstanding during 2017 were 100,000.

Instructions

  1. Prepare a single-step income statement.
  2. Prepare a comprehensive income statement for 2017 using the two statement format.
  3. Prepare a retained earnings statement for 2017.

Discuss the appropriate treatment in the financial statements of each of the following.

(a) Gain on sale of investment securities.

(b) A profit-sharing bonus to employees computed as a percentage of net income.

(c) Additional depreciation on factory machinery because of an error in computing depreciation for the previous year.

(d) Rent received from subletting a portion of the office space.

(e) A patent infringement suit, brought 2 years ago against the company by another company, was settled this year by a cash payment of $725,000.

(f) A reduction in the Allowance for Doubtful Accounts balance because the account appears to be considerably in excess of the probable loss from uncollectible receivables.

What is the basis for distinguishing between operating and non-operating items?
See all solutions

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