Question

The accountant for a company wants you to check over his work as he has never compiled a multi-step income statement before. He provides you with the following partial income statement beginning with operating expenses (NOT income from continuing operations):

Net Sales                                                                                                         $4,500,000      

Operating Expenses                                                                                         (1,500,000)

Operating Income                                                                                            $3,000,000

Depreciation Expense                                                                                           (20,000)

Extraordinary loss from tornado, unusual and infrequent                                               (750,000)

Cost of Goods sold                                                                                               (170,000)

Gain on Translation of foreign currency                                                                             30,000

Unrealized gain from Available for sale securities                                                  99,000     

Interest Revenue                                                                                                     2,500

Income before taxes                                                                                         $2,191,500

Tax Expense                                                                                                       (876,600)

Restructuring Costs, net of tax                                                                          (300,000)

Net Income                                                                                                         1,014,900

Impairment and loss on discontinued operations, net of tax                               (175,000)

Comprehensive Income                                                                                                    839,900

The accountant said he expressed all values above the tax expense line as pretax and all values below the tax line as net of tax in accordance with GAAP. You think that might have been one of the few things he did do correctly. Assuming a 40% tax rate, calculate correct values for the following:

Operating Income
Net Income
Comprehensive Income
Tax Expense

Calculate any relevant EPS figures assuming 1,000,000 common shares were outstanding during the year and that there were $70,000 of preferred dividends.

EPS
EPS
EPS

Answer 1

Income Statement of XXX
for the year ending
Perticulers	Amounts ($)	Amounts ($)
Income
Sales	4,500,000.00
Total of Income A		4,500,000.00
Less: cost of good sold	170,000.00
		170,000.00
Gross Profit ( Sale - Cost of good sold)		4,330,000.00
Expenses
Operating Expenses	1,500,000.00
Depriciation Exp	20,000.00
Total Expenses B		1,520,000.00
Income From Operation		2,810,000.00
Other Revenue & ( Expneses)
Gain on Foreign Currancy		30,000.00
Unrealized gain from sale of security		99,000.00
Interest Revenue		2,500.00
Extraordinary Loss from tornado		(750,000.00)
Total of Other Revenue & (expenses)		(618,500.00)
Net Income before taxes		2,191,500.00
Income Tax @ 40%	2191500*40%	876,600.00
Net Income after taxes		1,314,900.00
Less: Expenses of Discontinued Operation
Cost of reconstrution		300,000.00
Impairment & loss on discontinued business		175,000.00
Comprehensive Income		839,900.00
EPS = Net Income/ Number of Outstanding Share
Share Outstanding		1,000,000.00
EPS	(1314900/1000000)	1.31
Operating Income	2,810,000.00
Net Income	2,191,500.00
Comprehensive Income	839,900.00
Tax Expense	876,600.00
EPS	1.31