Question

The following incorrect income statement was prepared by the accountant of the Axel Corporation:

AXEL CORPORATION Income Statement For the Year Ended December 31, 2018
Revenues and gains:
Sales				$	650,000
Interest and dividends					38,000
Gain on sale of investments					85,000
Total revenues and gains					773,000
Expenses and losses:
Cost of goods sold	$	355,000
Selling expenses		65,000
Administrative expenses		85,000
Interest		32,000
Restructuring costs		61,000
Income taxes		70,000
Total expenses and losses					668,000
Net Income				$	105,000
Earnings per share				$	1.05

Required:
Prepare a multiple-step income statement for 2018 applying generally accepted accounting principles. The income tax rate is 40%.

Answer 1

• As asked, Multi Step Income Statement is provided from available data:

AXEL CORPORATION
Income Statement
For the Year Ended December 31, 2018
A	Sales Revenue		$               6,50,000.00
B	Cost of goods sold		$               3,55,000.00
C=A-B	Gross Profits		$               2,95,000.00
	Operating Expenses:
	Selling expenses	$                65,000.00
	Administrative expenses	$                85,000.00
D	Total Operating expense		$               1,50,000.00
E = C - D	Operating Income		$               1,45,000.00
	Other revenues & Expenses:
	Interest and dividends	$                38,000.00
	Gain on sale of investments	$                85,000.00
	Interest	$              (32,000.00)
F	Restructuring costs	$              (61,000.00)	$                  30,000.00
G = E + F	Net Income before Income taxes		$               1,75,000.00
H = G x 40%	Income Tax expenses [40%]		$                  70,000.00
I = G - H	Net Income		$               1,05,000.00
	Earning per share		$                             1.05