Question

Rembrandt Paint Company had the following income statement items for the year ended December 31, 2018 ($ in 000s):

Net sales	$	30,000	Cost of goods sold	$	16,500
Interest income		320	Selling and administrative expenses		3,700
Interest expense		590	Restructuring costs		2,000

In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $2.8 million and a gain on disposal of the component’s assets of $4.4 million. 600,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss).

Required:
Prepare a multiple-step income statement for 2018, including EPS disclosures. (Any amounts to be deducted, including expenses, should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.)

Answer 1

REMBRANDT PAINT COMPANY
Income Statement
For the Year Ended December 31, 2018
($ in thousands, except per share amounts)
Sales revenue		$30,000
Cost of goods sold		-$16,500
Gross Profit		$13,500
Operating Expenses:
Selling and Administration	-$3,700
Restructuring costs	-$2,000
Total Operating Expenses		-$5,700
Operating income		$7,800
Interest income (expense), net     [Interest expense - Interest Income = $590 - $320]		-$270
Income from continuing operations before income taxes		$7,530
Income tax expense       [$7,530 x 40%]		-$3,012
Income from continuing operations		$4,518
Discontinued operations:
Income from operations of discontinued component    [Refer working note below]	$1,600
Income tax expense   [$1,600 x 40%]	-$640
Income on discontinued operations		$960
Net income		$5,478
Earnings per share:
Income from continuing operations      [$4,518,000 ÷ 600,000 shares]		$7.53
Income on discontinued operations      [$960,000 ÷ 600,000 shares]		$1.60
Net income                                           [$5,478,000 ÷ 600,000 shares]		$9.13

.

Working note 1 - Computation of net income from operations of discontinued component (before tax)
Income from disposal of discontinued component	$4,400,000
Less: Loss from Operations of discontinued component	$2,800,000
Net income from operations of discontinued component (before tax)	$1,600,000

**$1,600,000 = $1,600 (in thousands)