Question

Income Statement and Retained Earnings

The Huff Company presents the following partial list of account balances taken from its December 31, 2016 adjusted trial balance:

Sales (net)	$122000			Operating expenses	$22500
Interest expense	3200			Common stock, $5 par	22000
Cost of goods sold	70000			Retained earnings, 1/1/2016	45500

The following information is also available for 2016 and is not reflected in the preceding accounts:

The common stock has been outstanding all year. A cash dividend of $1.32 per share was declared and paid.

Land was sold at a pretax gain of $6700.

Division X (a major component of the company) was sold at a pretax gain of $4690. It had incurred a $9420 pretax operating loss during 2016.

A tornado, which is an unusual event in the area, caused a $5350 pretax loss.

The income tax rate on all items of income is 30%.

The average shareholders’ equity is $89000.

Required:

1. Prepare a 2016 multiple-step income statement for Huff. Round earnings per share computations to two decimal places.

Huff COMPANY
Income Statement (Multi-Step)
For Year Ended December 31, 2016
		$
		$
		$
Other items
	$
		$
		$
Results from discontinued operations
	$
		$
Components of Income		EPS
		$
		$

2. Prepare a 2016 retained earnings statement.

Huff COMPANY
Statement of Retained Earnings
For Year Ended December 31, 2016
	$
	$
	$

3. Compute the 2016 return on common equity. Round to one decimal place.

%

Answer 1