Prepare in good form a multiple-step income statement for the year 2007. Assume
ID: 2371038 • Letter: P
Question
Prepare in good form a multiple-step income statement for the year 2007. Assume a 30% tax rate and that 80,000 shares of common stock were outstanding during the year.Retained earnings, December 31, 2006 $650,000
sales 1,400,000
Selling and administrative expenses 240,000
Hurricane loss (pre-tax) on plant (extraordinary item) 300,000
Cash dividends declared on common stock 33,600
Cost of goods sold 770,000
Depreciation charge in 2005 (due to error correction) 520,000
Dividend revenue 120,000
Interest expenses 100,000
Explanation / Answer
Income Statement Operating Income from sales: 1,400,000 Dividend revenue: 120,000 Total Revenue: 1520000 Cost of goods sold: 770000 Selling and administrative expenses 240,000 Hurricane loss: 300000 Earnings Before Interests and Taxes: 210000 Interest expenses: 100000 Earnings before tax: 110000 Tax at the rate of 30% : 33000 Net Income : 77000 Dividends declared: 33600 Retained Earnings: 43400