Question

Rembrandt Paint Company had the following income statement items for the year ended December 31, 2021 ($ in thousands):

Sales revenue ............................................$18,000
Interest revenue ...............................................100
Interest expense ...............................................300
Cost of goods sold .......................................10,500
Selling and administrative expense ............2,500
Restructuring costs ..........................................800

In addition, during the year, the company completed the disposal of its plastics business and incurred a loss from operations of $1.6 million and a gain on disposal of the component’s assets of $2 million. There were 500,000 shares of common stock outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25% on all items of income (loss).

 

Required:
Prepare a multiple-step income statement for 2021, including EPS disclosures. Use a multiple-step format similar to Illustration 4–4 of this chapter to prepare income from continuing operations, and then add to this the discontinued operations portion of the income statement

Answer 1

Rembrandt paint company
Income Statement
For the Year Ended December 31, 2021
($ in thousands, except per share amounts)
Sales revenue ..................................................		$18,000
Cost of goods sold .........................................		10,500
Gross profit ....................................................		7,500
Operating expenses:
Selling and administrative expense .............	$2,500
Restructuring costs ......................................	800	3,300
Operating income ...........................................		4,200
Other income (expense):
Interest revenue	100
Interest expense	(300)
Other income, net .....................................		(200)
Income from continuing operations before   income taxes................................................		4,000
Income tax expense ........................................		1,000
Income from continuing operations ................		3,000
Discontinued operations:
Income from operations of discontinued   component (including gain on disposal of   $2,000) .....................................................	400
Income tax expense .....................................	100
Income on discontinued operations ................		300
Net income .....................................................		$  3,300
Earnings per share:
Income from continuing operations ................		$6.00
Income on discontinued operations ................		0.60
Net income .....................................................		$6.60

Net income .....................................................

$6.60