Question

8. Information from the accounts of Natalie Company is shown below:

Sales	$9,000,000
Purchases	5,000,000
Operating expenses	1,100,000
Gain on sale of equipment	100,000
Gain on sale of component	1,000,000
Operating loss from disposed component	200,000
Merchandise inventory, 12/31/16	1,900,000

The merchandise inventory on January 1, 2016, was $3,200,000. There were 250,000 shares of common stock outstanding during the entire year.

Required:

Assuming a 30% income tax rate, prepare a 2016 income statement for Natalie Company. Use a multiple-step format.

Answer 1

Natalie Company

Multistep Income statement

	$	$
Sales revenue		9000,000
Less: cost of goods sold		(6300,000)
Inventory on 1/1/2016	3200,000
Purchases	5000,000
(-) Inventory on 12/31/2016	(1900,000)
Gross profit		2700,000
Operating items :		(1300,000)
Operating expenses	(1100,000)
Operating loss from discontinued component	(200,000)
Operating Profit		1400,000
Non operating or others :		1100,000
Gain on sale of equipment	100,000
Gain on sale of component	1000,000
Net profit		2500,000
Common shares outstanding		250,000 shares
Earnings per share (NP/shares outstanding)		$ 10.00