Question

Rembrandt Paint Company had the following income statement items for the year ended December 31, 2016 ($ in 000s):

Net sales	$	34,000	Cost of goods sold	$	18,500
Interest income		360	Selling and administrative expenses		4,100
Interest expense		670	Restructuring costs		2,400

In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $3.2 million and a gain on disposal of the component’s assets of $5.2 million. 600,000 shares of common stock were outstanding throughout 2016. Income tax expense has not yet been recorded. The income tax rate is 40% on all items of income (loss).

Required:

Prepare a multiple-step income statement for 2016, including EPS disclosures. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.)

Answer 1

REMBRANDT PAINT COMPANY
Income Statement
For the Year Ended December 31, 2016
Sales revenue		34000
Cost of goods sold		18500
Gross profit		15500
Operating expenses
Selling and administrative	(4100)
Restructuring costs	(2400)	(6500)
Operating income		9000
Interest income (expense), net		310
Income from continuing operations before income taxes		8690
Income tax expense		3476
Income from continuing operations		5214
Discontinued operations
Income from operations of discontinued component	2000
Income tax expense	800
Income on discontinued operations		1200
Net income		6414
Earnings per share:
Income from continuing operations		8.69
Income on discontinued operations		2
Net income		10.69

EPS = Earnings available for shareholder / Number of shareholder

EPS (Income from continuing operations ) = 5214/600 = 8.69

EPS (Income from Discontinued operations ) = 1200 / 600 = 2