Chang Company reported the following for the year ended December 31, 2018:

Gross sales revenue $750,000

Sales returns $ 30,000

Cost of goods sold $250,000

Selling and administrative expenses $100,000

Gain on disposal of the battery division; considered a discontinued operation $ 20,000

Loss from operations of the battery division $ 60,000

Interest expense $ 40,000

Gain on the sale of a fixed asset $ 10,000

Assume Chang’s income tax rate was 20% on all items. Also assume Chang had 140,000 shares of common stock outstanding throughout 2018.

Prepare Chang’s income statement in good form for the year ended December 31, 2018. Round any earnings per share figures to the nearest penny. The definition of “good form” includes, but is not limited to, showing $ signs when appropriate, showing underlines when appropriate, and showing double underlines when appropriate. You can use illustration 4.8 in your textbook as an example of “good form” in income statement preparation.

Expert Solution

Chang Company Income statement for the year ended December 31, 2018
Sales revenue	750000
less:sales return	-30000
Net sales revenue		720000
less:cost of goods sold		(250000)
Gross margin		470000
less: Selling and administrative expenses		(100000)
Income from operations		370000
Other income /(expenses)
Interest expense	(40000)
Gain on sale of fixed asset	10000
Total other income /(expenses)		(30000)
Income from continuing operations before tax		340000
Less:Income tax expense (340000*20%)		(68000)
Income from continuing operations		272000
Discontinued operations
Gain on disposal of the battery division ,net of tax (20000*(1-.20)]	16000
Loss from operations of the battery division net of tax (-60000(1-.20)]	(48000)
Income from discontinued operations		(32000)
Net income		240000
Earning per share
Income from continuing operations[272000/140000]		1.94
Income from discontinued operations [-32000/140000]		(.23)
Net income		1.71

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