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Fofino [41]
3 years ago
5

Problem 4-6 (Algo) Income statement presentation; Discontinued operations; EPS [LO4-1, 4-3, 4-4, 4-5] Rembrandt Paint Company ha

d the following income statement items for the year ended December 31, 2021 ($ in thousands): Sales revenue $ 24,000 Cost of goods sold $ 13,500 Interest revenue 220 Selling and administrative expense 3,100 Interest expense 420 Restructuring costs 1,400 In addition, during the year the company completed the disposal of its plastics business and incurred a loss from operations of $2.2 million and a gain on disposal of the component’s assets of $3.2 million. 600,000 shares of common stock were outstanding throughout 2021. Income tax expense has not yet been recorded. The income tax rate is 25% on all items of income (loss). Required: Prepare a multiple-step income statement for 2021, including EPS disclosures. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands except earnings per share. Round EPS answers to 2 decimal places.)
Business
1 answer:
Masja [62]3 years ago
3 0

Answer and Explanation:

The preparation of the multiple-step income statement is presented below:  

                                        Rembrandt Paint Company

                                               Income Statement  

                           For the Year Ended December 31, 2021  

Sales revenue  $24,000

Less: Cost of goods sold -$13,500

Gross profit  $10,500

Less:

Operating expenses  

Selling and administrative -$3,100

Restructuring costs  -$1,400

Operating Income  $6,000

Add: Interest revenue   $220

Less: Interest expense -$420

Income from Continuing operations before income tax expense and extra ordinary item $5,800

Less: Income tax expense (25%) -$1,450

Income from Continuing operations before extraordinary item $4,350

Discontinued Operations  

Income from operations of discontinued components ($3,200 - $2,200) $1,000

Less: Income tax expense (25%) $250

Income from Discontinued operations $750

Income before extraordinary items $5,100

Extraordinary item  $0

Net Income $5,100

Earning per share  

Income from Continuing operations before extraordinary item ($4,350 ÷ 600 shares) $7.25

Income from Discontinued operations ($750 ÷ 600 shares) $1.25

Extraordinary item  0

Net Income $8.50

We simply deduct all types of expenses and added all types of incomes

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a. Assets increase by $16,200; and Shareholders' equity increases by $16,200.

b. Assets increase by $800; and Assets decrease by $800.

c. Assets increase by $10,600; and Shareholders' equity increases by $10,600.

d. Assets increase by $260; and Liabilities increases by $260.

e. Assets increase by $9,600; and Assets decrease by $9,600.

Explanation:

The accounting equation that is impacted is given as follows:

Assets = Shareholders' equity + Liabilities

The impact of each transaction on individual items of the accounting equation are as follows:

a. The owner invested $16,200 cash in the company in exchange for its common stock.

Cash is an asset item, current asset to be specific; while common stock is one of the components of Shareholders' equity. The investment of $16,200 by the owner will therefore increase assets and Shareholders' equity.

Therefore, Assets increase by $16,200; and Shareholders' equity increases by $16,200.

b. The company purchased supplies for $800 cash.

Cash and supplies are both assets item, current assets to be specific. The purchase of supplies will increase the inventory of supplies which is an asset item by $800, while it will reduce cash which is another asset item also by $800.

Therefore, Assets increase by $800; and Assets decrease by $800.

c. The owner invested $10,600 of equipment in the company in exchange for more common stock.

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Therefore, Assets increase by $10,600; and Shareholders' equity increases by $10,600.

d. The company purchased $260 of additional supplies on credit.

Supplies is an assets item, current assets to be specific; while purchase on credit is a liability item, current liability which is an account payable to creditor of supplies. The purchase of supplies will increase supplies which is an assets item by $260, and it will also increasethe account payables to creditor of supplies.

Therefore, Assets increase by $260; and Liabilities increases by $260.

e. The company purchased land for $9,600 cash.

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Therefore, Assets increase by $9,600; and Assets decrease by $9,600.

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