Question

P 4-4 page 180-181

The following items are from Taperline Corporation on December 31, 2012. Assume a flat 40% corporate tax rate on all items,

including the casualty loss.

Sales          $670,000

Rental income        3,600

Sales	$670,000
Rental income	$3,600
Gain on the sale of fixed assets	$3,000
General and administrative expenses	$110,000
Selling expenses	$97,000
Interest expense	$1,900
Depreciation for the period	$10,000
Extraordinary item (casualty loss-pretax)	$30,000
Cost of sales	$300,000
Common stock (30,000 shares outstanding)	$150,000

Required:

a. Prepare a single-step income statement for the year ended December 31, 2012. Include earnings per share for earnings before extraordinary items and net income.

b. Prepare a multiple-step income statement. Include earnings per share for earnings before extraordinary items and net income.

Answer 1

	SINGLE STEP INCOME STATEMENT	Amount
	Revenue and Gains
	Sales	$           6,70,000
	Rental income	$                 3,600
	Gain on sale of Fixed Assets	$                 3,000
	Total Revenue and Gains(A)	$           6,76,600
	Less: Expenses and Losses
	Cost of Sales	$           3,00,000
	General and administration expenses	$           1,10,000
	Selling expenses	$              97,000
	interest Expenses	$                 1,900
	Depreciation for the period	$              10,000
	Extraordinary item (Casulaty Loss)	$              30,000
	Total of Expesnes and losses(B)	$           5,48,900
	Net Income (A-B)	$           1,27,700
	Add/Less Extrordinary items
	Rental income	$               -3,600
	Gain on sale of Fixed Assets	$               -3,000
	Extraordinary item (Casulaty Loss)	$              30,000
	Total	$              23,400
	Net income before extraordinary item (C)	$           1,51,100
	Number of shares outstanding = (D)	30,000	Shares
	Earning Per shares = (C / D)	$                   5.04	Per shares
	MULTI STEP INCOME STATEMENT
		Amount	Amount
	Sales Revenue	$           6,70,000
	Less: Cost of Goods Sold	$           3,00,000
	Gross Margin		$       3,70,000
	Less: Operating Expenses
	Selling expenses	$              97,000
	interest Expenses	$                 1,900
	Depreciation for the period	$              10,000
	General and administration expenses	$           1,10,000
	Total Operating Expenses		$       2,18,900
	Operating Income		$       1,51,100
	Non-Operating and others
	Rental income	$                 3,600
	Gain on sale of Fixed Assets	$                 3,000
	Extraordinary item (Casulaty Loss)	$             -30,000
			$         -23,400
	Net Income		$       1,27,700
	Number of shares outstanding =	30,000	Shares
	Earning Per shares = Operaing income / 30,000 shares	$                   5.04	Per shares