Question

The trial balance of Rollins Inc. included the following accounts as of December 31, 2018: Debits Credits Sales revenue 5,900,000 Interest revenue 40,000 Loss on sale of investments 10,000 Unrealized holding losses on investments 150,000 (on security available-for sales) Foreign currency translation adjustment 260,000 Cost of goods sold 4,400,000 Selling expenses 400,000 Restructuring costs 180,000 Interest expense 20,000 General and administrative expenses 300,000 Cash 385,000 Accounts receivable 195,000 Raw materials inventory 36,000 Note receivable 120,000 Interest receivable 4,000 Rollins had 100,000 shares of stock outstanding throughout the year. Income tax expense has not yet been accrued. The effective tax rate is 40%. Required: Prepare a 2018 multiple-step income statement for Rollins Inc. with earnings per share disclosure (No credit for single-step income statement).

Answer 1

Rollins Inc.
Multi-Step Income Statement
For the year ending December 31, 2018
Sales revenue		$5900000
Cost of goods sold		($4400000)
Gross profit		$1500000
Operating expenses;
Selling expenses	$400000
General & administrative expenses	$300000
Total operating expenses		($700000)
Operating income		$800000
Non-operating and other items;
Interest revenue	$40000
Loss on sale of investments	($10000)
Interest expense	($20000)
Restructuring costs	($180000)
Total non-operating and other items		($170000)
Net income before taxes		$630000
Taxes (40%)		($252000)
Net income after taxes		$378000
Number of outstanding shares		100000
Earnings per share ($378000 / 100000)		$3.78

Working Note;

1. Unrealized holding losses on security available-for sales are not reported in income statement. This is reported in other comprehensive income till actual sale of the securities.

2. Foreign currency translation adjustment is reported in the equity section of the balance sheet.