Question

4. Information related to Batavia Furniture Company for the year ended December 31, 2009, follows.

Cost of Goods Sold	$ 70,000
Dividends Declared	5,000
Flood Loss (pre-tax)	12,000
General Expense	8,000
Other Income	9,000
Other Expense	11,000
Retained Earnings, January 1, 2009	116,000
Sales	131,000
Selling Expense	7,000

Required:

Prepare in good form a multiple-step income statement for the year 2009. Assume a 50% tax rate and that 5,000 shares of common stock were outstanding during the year.

Answer 1

Batavia Furniture Company
Income Statement
For the Year Ended December 31, 2009
Sales		131000
Cost of Goods Sold		70000
Gross Profit		61000
Operating Expenses
Selling Expenses	7000
General Expenses	8000	15000
Operating Income		46000
Other Income		9000
Other Expense		(11000)
Income Before Tax		44000
Income Tax		22000
Income Before Extraordinary Items		22000
Flood Loss, Net of $6,000 Tax		6000
Net Income		16000
Basic Earnings Per Share:
Before extraordinary item		4.40
Extraordinary item		(1.20)
Basic earnings per share		3.20