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Presented below are selected ledger accounts of Windsor Corporation as of December 31, 2017. Cash $55,200...

Presented below are selected ledger accounts of Windsor Corporation as of December 31, 2017.

Cash $55,200
Administrative expenses 102,800
Selling expenses 83,460
Net sales 549,100
Cost of goods sold 263,700
Cash dividends declared (2017) 24,130
Cash dividends paid (2017) 22,300
Discontinued operations (loss before income taxes) 42,900
Depreciation expense, not recorded in 2016 30,600
Retained earnings, December 31, 2016 96,200

Effective tax rate 30%

Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 21,240 shares of common stock were outstanding during 2017.


Solutions

Expert Solution

Calculation of Income before Income taxes

from Continuing Operations

Net Sales $549,100
Less: Cost of Goods Sold $263,700
Gross Profit $285,400
Expenses
Administrative expenses $102,800
Selling expenses $83,460 $186,260
Income from Continuing Operations Before Income Tax $99,140

Partial Income Statement

Windsor Corporation
Partial Income Statement
For the Year ended on December 31, 2017
Income from Continuing Operations before Income tax $99,140
Less: Income Tax@30% $29,742
Income from Continuing Operations $69,398
Less: Loss from Discontinuing Operations after Income taxes - Note 1 $30,030
Net Income $39,368
Basic Earnings Per Common share [EPS] - Note 2 $1.85

Note 1: Calculation of Loss from Discontinuing Operations after Income Tax

Loss on Discontinued Operations [Before Income Taxes] $42,900
Income Tax benifit @30% [$69,398 x 30%] $12,870
Loss on Discontinued Operations, net of Taxes $30,030

Note 2 Calculation of Basic Earnings per Common Share

Net Income attributable to common stockholders = $39,368

Common stock outstanding = 21,240 shares

Basic Earnings per share = Net Income ÷ Common stock Outstanding

= $39,368 ÷ 21,240 shares

= $1.85 per share

Note 3

  • Depreciation shall be adjusted against the opening retained earnings. So there will be no impact on Current year income statement.
  • Only current Year Income attributable to Common Stockholders shall be considered for calculating Current Year EPS. Previous Year's Retained earnings shall not be considered to calculate Current Year EPS.

ekkarill92 answered 1 year ago
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