Question

The accountant of Teal Shoe Co. has compiled the following information from the company’s records as a basis for an income statement for the year ended December 31, 2017.

Rent revenue		$31,400
Interest expense		20,400
Market appreciation on land above cost		33,400
Salaries and wages expense (selling)		117,200
Supplies expense (selling)		20,000
Income tax		39,800
Salaries and wages expense (administrative)		138,300
Other administrative expenses		54,100
Cost of goods sold		498,400
Net sales		982,400
Depreciation on plant assets (70% selling, 30% administrative)		67,400
Cash dividends declared		18,400

There were 19,980 shares of common stock outstanding during the year.

Part 1

Prepare a multiple-step income statement. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

TEAL SHOE CO.

INCOME STATEMENT

FOR THE YEAR ENDING DECEMBER 31, 2017

Sales
Sales revenue			$982,400
Cost of goods sold			498,400
Gross profit on sales			484,000
Operating Expenses
Selling expenses
Salaries and wages expense	117,200
Supplies expense	20,000
Depreciation of sales equipment ($67,400 * 70%)	47,180	184,380
Administrative expenses
Salaries and wages expense	138,300
Depreciation of office equipment ($67,400 * 30%)	20,220
Other administrative expenses	54,100	212,620	397,000
Income from operations			87,000
Other Revenues and Gains
Rental revenue			31,400
Other Expenses and Losses
Interest expense			20,400
Income before income tax			98,000
Income tax			39,800
Net income for the year			$58,200
Earnings per share ($58,200 / 19,980 shares)			$2.91

Note for understanding:

• Market appreciation on land above cost is not recorded in the books. Thus not a part of income statement
• Cash dividends declared is a part of statement of Retained earnings . Thus not a part of income statement