Question

Presented below is information related to Donaldson Corp., for the year 2017.

Net sales		$1,950,000
Cost of goods sold		1,200,000
Selling expenses		95,000
Administrative expenses		70,000
Dividend revenue		30,000
Interest revenue		20,000
Interest expense		45,000
Write-off of goodwill due to impairment		75,000
Depreciation expense omitted in 2015		105,000
Dividends declared		120,000
Effect on prior years of change in accounting principle (credit)		220,000
Loss from operations of discontinued component of business		240,000
Gain from disposal of component of business		300,000
Federal tax rate of 30% on all items

Prepare a multiple-step income statement for 2017. Assume the 200,000 shares of common stock were outstanding during 2017. (Round earnings per share to 2 decimal places, e.g. 5.25.)

Answer 1

Answer:

Net Sales		1950000
Cost of Goods Sold		(1200000)
Gross Profit		750000
Operating Expenses
Selling Expenses		(95000)
Administrative Expenses		(70000)
Income from Operations		585000
Other Revenue & Gains:
Dividend revenue		30000
Interest revenue		20000
		635000
Other Expenses & Losses:
Interest payable	45000
Loss due to goodwill writeoff	75000	(120000)
Income before Income tax		515000
Discountinued Operations:
Loss from discountinued operation business (240000*70%) After tax effect	(168000)
Gain from disposal of component of business (300000*70%)	210000	42000
Net Income		402500

Income from continuing operations = 360500/200000 shares = 1.8 / share
Discountinued operations = 4200/200000 shares = 0.21
Net Income = 402500/200000 = 2.01 / share