Question

Presented below are 11 income statement items from Braun Company for the year ended December 31, 2020.

Sales revenue $2,700,000

Cost of goods sold 1,150,000

Interest revenue 15,000

Loss from abandonment of plant assets   45,000

Gain from extinguishment of debt 28,000

Selling expenses 290,000

Administrative expenses 190,000

Effect of change in estimated useful lives of fixed assets (included in administrative expenses) 35,000

Loss from earthquake 30,000

Gain on disposal of discontinued operation 50,000

Instructions

a. Using the information above, prepare a condensed multiple-step income statement. Assume a tax rate of 30% and 100,000 shares of common stock outstanding during 2020.

Answer 1

A condensed multiple-step income statement is prepared as follows:

                                                    Braun Company

                                            Multiple-step income statement

                                     for the year ended December 31, 2020.

	$	$
Sales Revenue		2,700,000
Less: Cost of goods sold		1,150,000
Gross Profit		1,550,000
Operating Expenses:
Selling expenses	290,000
Administrative expenses	190,000	480,000
Income from operation		1,070,000
Other (Gain) or Loss
Interest revenue	(15,000)
Gain from extinguishment of debt	( 28,000)
Loss from earthquake	30,000
Loss from abandonment of plant assets	45,000	32,000
Income before tax		1,038,000
Income Tax (30%)		311,400
Income from continuing operation		726,600
Discontinued Operation:
Gain on disposal of discontinued operation	50,000
Less: Income Tax (30%)	15,000	35,000
Net Income		$761,600

Earning Per Share:

Common stock outstanding is 100,000 shares

a) Income from continuing operation = $726,600 / 100,000 shares

                                                     = $7.27

b) Discontinued Operation = $35,000 / 100,000 shares

                                        = $0.35

c)Net Income = $761,600 / 100,000 shares

                      = $7.62