Question

The following balances were taken from the books of Sheffield Corp. on December 31, 2017.

Interest revenue		$87,000		Accumulated depreciation—equipment		$41,000
Cash		52,000		Accumulated depreciation—buildings		29,000
Sales revenue		1,381,000		Notes receivable		156,000
Accounts receivable		151,000		Selling expenses		195,000
Prepaid insurance		21,000		Accounts payable		171,000
Sales returns and allowances		151,000		Bonds payable		101,000
Allowance for doubtful accounts		8,000		Administrative and general expenses		98,000
Sales discounts		46,000		Accrued liabilities		33,000
Land		101,000		Interest expense		61,000
Equipment		201,000		Notes payable		101,000
Buildings		141,000		Loss from earthquake damage		151,000
Cost of goods sold		622,000		Common stock		501,000
				Retained earnings		22,000

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

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

Answer 1

          Sheffield Corporation    

   Income statement

     December 31, 2017

Sales
Sales revenue		1381000
Less: sales discount	46000
Less: sales return and allowances	151000
		197000
Net sales		1184000
Less: cost of goods sold		622000
Gross profit		562000
Operating expenses:
Selling expenses	195000
Administrative and general expenses	98000
		293000
Operating income		269000
Non-operating items
Interest revenue	87000
Less: interest expense	61000	26000
Income before taxes		295000
Less: income taxes	(295000*34%)	100300
Income from continuing operation		194700
Extra ordinary items
Less: loss from earthquake		151800
Net income		42900
No. of shares		100000
Earnings per share	(42900/100000)	0.42