Question

The following is a partial trial balance for General Lighting Corporation as of December 31, 2018:

Account Title	Debits	Credits
Sales revenue		2,500,000
Interest revenue		83,000
Loss on sale of investments	24,000
Cost of goods sold	1,220,000
Loss from write-down of inventory due to obsolescence	230,000
Selling expenses	330,000
General and administrative expenses	165,000
Interest expense	82,000

200,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40%.

Required:
1. Prepare a single-step income statement for 2018, including EPS disclosures.
2. Prepare a multiple-step income statement for 2018, including EPS disclosures.

Answer 1

Single step income statement

Sales revenue	2,500,000
Interest revenue	83,000
Total revenue (i)	2,583,000
Expenses:
Loss on sale of investments	24,000
Cost of goods sold	1,220,000
Loss from write-down of inventory due to obsolescence	230,000
Selling expenses	330,000
General and administrative expenses	165,000
Interest expense	82,000
Total expenses (ii)	2,051,000
Profit before tax (i) - (ii)	$532,000
Income tax	- 212,800
Net income	$319,200
EPS = Net income/Number of common shares	$1.596

Multi step income statement

Sales	2,500,000
Cost of goods sold	- 1,220,000
Gross profit	1,280,000
Operating expenses:
Selling expenses	- 330,000
General and administrative expenses	- 165,000
Income from operations	785,000
Other revenues :
Interest revenue	83,000
Other expenses and losses:
Loss on sale of investments	- 24,000
Loss from write-down of inventory due to obsolescence	- 230,000
Interest expense	- 82,000
Income before income tax	532,000
Income tax expense	- 212,800
Net income	319,200
EPS = Net income/Number of common shares	$1.596

Note: If EPS is rounded off to two places, it will be $1.60

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