Question

(CO C) Presented below is information related to Tidal Wave Company.

Retained earnings, December 31, 20X2	$ 2,350,000
Sales	2,600,000
Selling and administrative expenses	240,000
Earthquake loss (pre-tax) on plant (extraordinary item)	250,000
Cash dividends declared on common stock	53,600
Cost of goods sold	1,000,000
Gain resulting from computation error on depreciation charge in 2009 (pre-tax)	520,000
Other revenue	80,000
Other expenses	50,000

Instructions: Prepare in good form a multiple-step income statement for the year 20X2. Assume a 30% tax rate and that 100,000 shares of common stock were outstanding during the year.

Answer 1

Particulars		Amount
Sales		$2,600,000.00
Cost of Goods sold		$1,000,000.00
Gross profit		$1,600,000.00
Operating expenses
Selling and administrative expenses		$240,000.00
Operating income		$1,360,000.00
Other revenue		$80,000.00
Other expenses		-$50,000.00
Net income before tax		$1,390,000.00
Income tax		$417,000.00
Income from continuing operations and extraornidanry and prior period items		$973,000.00
Gains from omputation error on depreciation charge less income tax		$364,000.00
Extraordinary loss on earth quake incluing tax savings		-$175,000.00
Net income		$1,162,000.00
Number of common shares		100000
Earnings per share		$11.62