Prepare a multiple-step income statement for the year ended December 31, 2016, c
ID: 2530932 • Letter: P
Question
Prepare a multiple-step income statement for the year ended December 31, 2016, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. Enter all amounts as positive numbers EXCEPT in the Other income and expenses. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign. Round earnings per share to the nearest cent.
Required: 1. After all of the transactions for the year ended December 31, 2016, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data that follows were taken from the records of Equinox Products Inc. A.Prepare a multiple-step income statement for the year ended December 31, 2016, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. Enter all amounts as positive numbers EXCEPT in the Other income and expenses. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign. Round earnings per share to the nearest cent.
Income Statement data: Advertising expense $ 150,000 Cost of merchandise sold 3,700,000 Delivery expense 30,000 Depreciation expense-office buildings and equipment 30,000 Depreciation expense-store buildings and equipment 100,000 Dividend revenue 4,500 Gain on sale of investments 4,980 Income from Pinkberry Co. investment 76,800 Income tax expense 140,500 Interest expense 21,000 Interest revenue 2,720 Miscellaneous administrative expense 7,500 Miscellaneous selling expense 14,000 Office rent expense 50,000 Office salaries expense 170,000 Office supplies expense 10,000 Sales 5,254,000 Sales commissions 185,000 Sales salaries expense 385,000 Store supplies expense 21,000 Retained earnings and balance sheet data: Accounts payable $ 194,300 Accounts receivable 545,000 Accumulated depreciation—office buildings and equipment 1,580,000 Accumulated depreciation—store buildings and equipment 4,126,000 Allowance for doubtful accounts 8,450 Available-for-sale investments (at cost) 260,130 Bonds payable, 5%, due 2024 500,000 Cash 246,000 Common stock, $20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding) 2,000,000 Dividends: Cash dividends for common stock 155,120 Cash dividends for preferred stock 100,000 Goodwill 500,000 Income tax payable 44,000 Interest receivable 1,125 Investment in Pinkberry Co. stock (equity method) 1,009,300 Investments-Dream Inc. bonds (long term) 90,000 Merchandise inventory (December 31, 2016), at lower of cost (FIFO) or market 778,000 Office buildings and equipment 4,320,000 Paid-in capital from sale of treasury stock 13,000 Excess of issue price over par: -Common 886,800 -Preferred 150,000 Preferred 5% stock, $80 par (30,000 shares authorized; 20,000 shares issued) 1,600,000 Premium on bonds payable 19,000 Prepaid expenses 27,400 Retained earnings, January 1, 2016 9,319,725 Store buildings and equipment 12,560,000 Treasury stock (5,400 shares of common stock at cost of $33 per share) 178,200 Unrealized gain (loss) on available-for-sale investments (6,500) Valuation allowance for available-for-sale investments (6,500)Explanation / Answer
Income Statement for the Year ended Dec 31, 2016 Sales 5254000 Less:Cost of merchandise sold -3700000 Gross margin 1554000 Less: Operating Expenses: Sales commissions 185,000 Sales salaries expense 385,000 Store supplies expense 21,000 Advertising expense 150,000 Delivery expense 30,000 Miscellaneous selling expense 14,000 Depreciation expense-Office Bldgs& equipment 30,000 Depreciation expense-Store Bldgs& equipment 100,000 Miscellaneous administrative expense 7,500 Office rent expense 50,000 Office salaries expense 170,000 Office supplies expense 10,000 -1152500 Operating Income 401500 Add: Non-Operating items Income from Pinkberry Co.investment 76,800 Dividend Revenue 4,500 Gain on sale of equipment 4,980 Interest revenue 2,720 Interest expense (21,000) 68,000 Income before Tax 469500 Less:Income tax expense -140500 Net Income after tax 329000 Less Preferrred dividend -100000 Income available to Common Stockholders 229000 No.of common stock O/s 100000 Earnings Per Share 229000/100000= 2.29 Retained Earnings as at Dec 31,2016 Retained earnings, Januar 1, 2016 9,319,725 Add: Net Income after tax-2016 329000 Less:Dividends to Cash dividends for common stock (155,120) Cash dividends for preferred stock (100,000) Closing Balance 9,393,605 Balance sheet as at Dec 31. 2016 Assets Current Assets: Cash 246,000 Accounts Receivables 545000 Less: Allownce for doubtful acccounts ( 8450) 536,550 Merchandse inventory (Dec 31, 2016) at lower of cost (FIFO) or market 778,000 Prepaid expenses 27,400 Interest receivable 1,125 Investment in Pinkberry Co stock (equity method) 1,009,300 Available for sale investments (at cost) 247,130 Total Current assets 2,845,505 Fixed Assets: Office buildings and equipment 4,320,000 Less: Accumulated Depn. Office Bldgs.& Equipment (1,580,000) 2,740,000 Store buildings and equipment 12,560,000 Less: Accumulated Depn. Store Bldgs.& Equipment (4,126,000) 8,434,000 Investment in Dream Inc bonds (long term) 90,000 Goodwill 500,000 11,764,000 Total Fixed Assets Total Assets 14,609,505 Liabilities Liabilities & Stockholders' Equity Liabilites Current Liabilities: Accounts Payable 194,300 Income tax payabe 44,000 Total current liabilties 238,300 Long-term Liabilities: Bonds payable, 5% due 2024 500,000 Premium of bonds payable 19,000 Total Long-term Liabilities 519,000 Total Liabilites 757,300 Stockholders' Equity Commonstock $20 par (400000 shares authorised ;100,000 shares issued 94,600 outstanding 2,000,000 Excess of issue price over par - common stock 886,800 Preferred 5% stock, $80 par (30,000 shares authoriseed; 20,000 shares issued) 1,600,000 Excess of issue price over par - preferred stock 150,000 Treasury stock (5,400 shares of common stock at cost of $33 per share) (178,200) Paid in capital from sale of treasury stock 13,000 Equity 4,471,600 Retained Earnings 9,393,605 Unrealised gan (loss) on available for sale investments (6,500) Valuation allowance for available for sale investments (6,500) Retained Earnings as at Dec 31,2016 9,380,605 Total Stockholders' Equity 13,852,205 Total Liabilities & Stockholders' Equity 14,609,505