Porter Corporation\'s capital structure consists of 50,000 shares of common stoc
ID: 2417918 • Letter: P
Question
Porter Corporation's capital structure consists of 50,000 shares of common stock. At December 31, 2014 an analysis of the accounts and discussions with company officials revealed the following information:
Sales revenue $1,200,000
Earthquake loss (net of tax) (extraordinary item) 56,000
Selling expenses 128,000
Cash 60,000
Accounts receivable 90,000
Common stock 200,000
Cost of goods sold 701,000
Accumulated depreciation-machinery 180,000
Dividend revenue 8,000
Unearned service revenue 4,400
Interest payable 1,000
Land 370,000
Patents 100,000
Retained earnings, January 1, 2014 290,000
Interest expense 17,000
Administrative expenses 170,000
Dividends declared 24,000
Allowance for doubtful accounts 5,000
Notes payable (maturity 7/1/17) 200,000
Machinery 450,000
Materials 40,000
Accounts payable 60,000
The amount of income taxes applicable to ordinary income was $57,600, excluding the tax effect of the earthquake loss which amounted to $24,000.
Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a retained earnings statement.
Explanation / Answer
(a) Multiple-step Income statement
b) Retained Earning statment
Particulars Amount $ Amount $ Net Sales 1,200,000 Less : COGS - 701,000 Gross Profit 499,000 Less : Operating Expenses Selling Expenses - 128,000 Admin expenses - 170,000 Total operating expenses - 298,000 Operating income 201,000 Less/Add Non operating Items Dividend Revenue 8,000 Ineterst Expense - 17,000 Total Non Operating - 9,000 Total Ordinary Income 192,000 Less taxes on ordinary income ( Net of extraordinary Loss) (57,600 - 24,000) -33,600 Net Ordinary income 158,400 Less : Earthquake Loss ( Gross) ( 56,000 + 24,000) -80,000 Net Income 78,400