Question

Presented below are selected ledger accounts of Riverbed Corporation as of December 31, 2017.

Cash		$52,200
Administrative expenses		104,700
Selling expenses		82,970
Net sales		559,300
Cost of goods sold		268,600
Cash dividends declared (2017)		23,260
Cash dividends paid (2017)		17,600
Discontinued operations (loss before income taxes)		41,600
Depreciation expense, not recorded in 2016		39,200
Retained earnings, December 31, 2016		97,930
Effective tax rate 30%

Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 20,850 shares of common stock were outstanding during 2017.

Answer 1

Riverbed Corporation

Partial Income Statement

Riverbed Corporation
Partial Income Statement
Income before income tax		$103,030
Income tax		$30,909
Income from continuing operations		$72,121
Discontinued operations
loss	$41,600
applicable income tax	$12,480	$29,120
Net income		$43,001
Earnings per share:
Income from continuing operations	72,121/20,850 shares	$3.46
Loss on discontinued operations, net of tax	29,120/20,850	($1.40)
Net income		$2.06

income before income tax –

net sales$559,300

Less: COGS$268,600

Gross margin$290,700

Less: Operating expenses

Admn. Expenses$104,700

Selling expenses$82,970

Income before tax$103,030

Depreciation expense not recorded in 2016 would be shown as a prior period adjustments to the retained earnings account.

Also, dividends declared and dividends paid are items of retained earnings and do not form part of income statement.