Question

During 2016, the following events and transactions occurred: 1. JR recognized sales revenues of $108,000. It incurred cost of goods sold of $62,000 and operating expenses of $12,000. 2. JR issued 1,000 shares of its $5 par common stock for $14 per share. 3. JR invested $30,000 in available-for-sale securities. At the end of the year, the securities had a fair value of $35,000. 4. JR paid dividends of $6,000. The income tax rate on all items of income is 30%. Required: 1. Prepare a 2016 income statement for JR which includes net income and comprehensive income (ignore earnings per share). 2. Prepare (a) a 2016 income statement (ignore earnings per share) and (b) a separate 2016 statement of comprehensive income.

Answer 1

1	Statement of Income and Comprehensive Income
	Sales Revenue	$108,000
	Less: Cost of goods sold	(62,000)
	Gross Margin	$46,000
	Less: Operating Expenses	(12,000)
	Income from opeartions	34,000
	Less: Income tax expense at 30%	(10,200)
	Net Income	23,800
	Other comprehensive income:
	Unrealized increase in value of available-for sale securities (net of $1,500 income taxes)	3,500
	Comprehensive income	27,300
2	Statement of Net Income
	Sales Revenue	$108,000
	Less: Cost of goods sold	(62,000)
	Gross Margin	$46,000
	Less: Operating Expenses	(12,000)
	Income from opeartions	34,000
	Less: Income tax expense at 30%	(10,200)
	Net Income	23,800
	Statement of Comprehensive Income
	Net Income	23,800
	Other comprehensive income:
	Unrealized increase in value of available-for sale securities (net of $1,500 income taxes)	3,500
	Comprehensive income	27,300