Porter Corporation\'s capital structure consists of 50,000 shares of common stoc
ID: 2483789 • Letter: P
Question
Porter Corporation's capital structure consists of 50,000 shares of common stock. At December 31, 2010 an analysis of the accounts and discussions with company officials revealed the following information: Sales $1,100,000 Purchase discounts 18,000 Purchases 642,000 Earthquake loss (net of tax) (extraordinary item) 42,000 Selling expenses 128,000 Cash 60,000 Accounts receivable 90,000 Common stock 200,000 Accumulated depreciation 180,000 Dividend revenue 8,000 Inventory, January 1, 2010 152,000 Inventory, December 31, 2010 125,000 Unearned service revenue 4,400 Accrued interest payable 1,000 Land 370,000 Patents 100,000 Retained earnings, January 1, 2010 290,000 Interest expense 17,000 General and administrative expenses 150,000 Dividends declared 29,000 Allowance for doubtful accounts 5,000 Notes payable (maturity 7/1/13) 200,000 Machinery and equipment 450,000 Materials and supplies 40,000 Accounts payable 60,000 The amount of income taxes applicable to ordinary income was $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a retained earnings statement.
Explanation / Answer
Porter Corporation Income Statement For the year ended December 31, 2014 Sales revenue $11,00,000 Cost of goods sold Beginning Inventory $1,52,000 Purchases $6,42,000 Less: Purchase discount $18,000 cost of goods available for sale $7,76,000 Less: ending Inventory $1,25,000 Cost of goods sold $6,51,000 Gross Profit $4,49,000 Operating expenses Selling expenses $1,28,000 Administrative expenses $1,50,000 Total Operating expenses $2,78,000 Operating Income $1,71,000 Other revenue & expense Dividend revenue $8,000 Interest expense $17,000 -$9,000 Income before taxes $1,62,000 Income tax $48,600 Income before extraordinary item $1,13,400 Extraordinary loss due to earthquake, net of tax -$42,000 Net Income $71,400 Per share of common stock - Income before extraordinary item $2.27 Extraordinary loss - net of tax -$0.84 Net Income $1.43 Porter Corporation Retained Earnings Statement For the year ended December 31, 2014 Retained Earnings January 1 $2,90,000 Add: Net Income $71,400 Deduct Dividend Declared $29,000 $42,400 Retained Earnings December 31 $3,32,400