Question

It is December 31, 2012, and the program at Monsters, Inc. is crashing. Instead of producing an income statement, it keeps printing an alphabetical list of accounts:

Administrative expenses                                                                                                           $215,000

Cost of goods sold                                                                                                                       408,500

Extraordinary casualty loss                                                                                                          70,000

Income taxes                                                                                                                              54,900

Loss on inventory write-down (nonrecurring)                                                                               13,000

Gain on foreign currency translation                                                                                            19,500

Loss from discontinued operations                                                                                              30,000

Sales                                                                                                                                          945,000

Selling expenses                                                                                                                          145,000

1. Prepare the firm’s multiple-step income statement for 2012 with EPS disclosures in accordance with G.A.A.P. Monsters Inc firm has 65,000 shares of common stock outstanding and has a 20% federal income tax rate. (Show work for these calculations)

Answer 1

IN THE BOOKS OF MONSTERS, INC.

MULTI STEP INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31 2012

PARTICULARS	AMOUNT $	AMOUNT $
SALES		945000
COST OG GOODS SOLD		(408500)
GROSS PROFIT		536500
OPERATING EXPENSES
SELLING EXPENSES	(145000)
ADMINISTRATIVE EXPENSES	(215000)
EXTRAORDINARY CASUALTY LOSS	(70000)
LOSS ON INVENTORY WRITE DOWN	(13000)
TOTAL OPERATING EXPENSES		(443000)
OPERATING INCOME		NIL
NON OPERATING INCOME
GAIN ON FOREIGN CURRENCY TRANSLATION		19500
LOSS FROM DISCONTINUED OPERATIONS		(30000)
INCOME BEFORE TAX		83000
INCOME TAX @ 20%		(16600)
INCOME AFTER TAX		66400

EPS = INCOME AFTER TAX / OUTSTANDING COMMON STOCK

= 66400 / 65000 = $1.0215