Question

The adjusted trial balance of Pacific Scientific Corporation on December 31, 2016, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,150; cost of goods sold, $1,340; selling expenses, $165; general and administrative expenses, $155; interest expense, $30; and gain on sale of investments, $70. Income tax expense has not yet been accrued. The income tax rate is 30%. Assume the company’s accountant prepared a multiple-step income statement.

a.	What amount would appear in that statement for operating income? Ignore EPS disclosures. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

b.	What amount would appear in that statement for nonoperating income? Ignore EPS disclosures. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Answer 1

a)
Particulars	Amount	Amount
Sales revenue		2150
Less: Cost of Goods sold		1340
Gross profit		810
Less: operating Expenses
Selling Expenses	165
General and administrative expenses	155
Total Operating Expenses		320
Operating income		490
Therefore operating income is $490
b)
Gain on sale of the investments	70
less: interest expense	-30
Non operating income		40
2)
Multi step Income statement
Particulars	Amount	Amount
Sales revenue:
Sales revenue:	2150
Less: Sales returns and allowances	0
Sales discounts	0
		2150
Less:Cost of goods sold		1340
Gross profit		810
Less: Operating Expenses
General and administrative expenses	155
Selling expenses	165	320
Income from operations		490
Add: Other revenue and gains
Gain on sale of investments	70
Less: other expenses and losses	-30	40
Income before income tax and extraordinary income		450
Less : Income tax Expenses		135
Income before extraordinary income		315
less: extraordinary items		0
net income		315