Question

Presented below is information related to Donaldson Corp., for the year 2020. Prepare an income statement and answer the question below and other questions requiring the use of this income statement. Net sales $1,820,000 Cost of goods sold 1,240,000 Selling expenses 86,000 Administrative expenses 74,000 Dividend revenue 25,000 Interest revenue 20,000 Interest expense 50,000 Write-off of goodwill due to impairment 40,000 Depreciation expense omitted in 2018 105,000 Dividends declared 12,000 Effect on prior year’s of change in accounting principle (credit) 230,000 Loss from operations of discontinued component of business, net of tax 190,000 Gain from disposal of component of business, net of tax 260,000 Federal tax rate of 20% on all items Assume the 200,000 shares of common stock were outstanding during 2020. In the multiple-step income statement for 2020, how much was net income?

Answer 1

Donaldson Corp.
Income Statement
For the year Ended December 31, 2020
Net Sales		1,820,000
Cost of goods sold		1,240,000
Gross Profit		580,000
Operating expenses
Selling expenses	86,000
Administrative Expense	74,000	160,000
Income From Operations		420,000
Other Revenues and Gains
Dividend Revenue	25,000
Interest Revenue	20,000	45,000
		465,000
Other Expenses and Losses
Interest expense	50,000
Loss due to write-off of goodwill	40,000
		90,000
Income Before Income Tax		375,000
Income Taxes		75,000
Income from Continuing Operations		300,000
Discontinued Operations
Loss from operations of discontinued component of business, net of tax	(190,000)
Gain from disposal of component of business, net of tax	260,000
		70,000
Net Income		370,000
Per share of common stock:
Income from continuing operations		1.50
Discontinued operations		0.35
Net Income		1.85