Question

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

 

Required:
Prepare a multiple-step income statement for 2021 applying generally accepted accounting principles. The income tax rate is 25%. Be sure to include appropriate headings and subtotal titles. An example of a multiple-step income statement can be found in Illustration 4–4 of this chapters.

Answer 1

AXEL CORPORATION
Income Statement
For the Year Ended December 31, 2021
Sales revenue ..................................................		$ 592,000
Cost of goods sold .........................................		325,000
Gross profit ....................................................		267,000
Operating expenses:
Selling expense ............................................	$67,000
Administrative expense ...............................	87,000
Restructuring costs ......................................	55,000
Total operating expenses .........................		209,000
Operating income ...........................................		58,000
Other income (expense): Interest revenue ............................................	32,000
Interest expense ...........................................   Gain on sale of investments ........................   Total other income, net ...........................	(16,000) 86,000	102,000
Income before income taxes............................		160,000
Income tax expense* ......................................		40,000
Net income .....................................................		$120,000
Earnings per share .........................................		$ 1.20

 

         * $160,000 × 25%

 

Earnings per share ......................................... $ 1.20