Question

The following balances were taken from the books of Splish Corp. on December 31, 2017.Interest revenue $87,550 Accumulated depreciation—equipment $41,550Cash 52,550 Accumulated depreciation—buildings 29,550Sales revenue 1,381,550 Notes receivable 156,550Accounts receivable 151,550 Selling expenses 195,550Prepaid insurance 21,550 Accounts payable 171,550Sales returns and allowances 151,550 Bonds payable 101,550Allowance for doubtful accounts 8,550 Administrative and general expenses 98,550Sales discounts 46,550 Accrued liabilities 33,550Land 101,550 Interest expense 61,550Equipment 201,550 Notes payable 101,550Buildings 141,550 Loss from earthquake damage 151,550Cost of goods sold 622,550 Common stock 501,550Retained earnings 22,550Assume the total effective tax rate on all items is 34%.Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

Answer:

Sales revenue                        1,381,550

Sales discounts                        (46,550)

Sales returns and allowances (151,550)

net sales                                   1,183,450

Cost of goods sold                  (622,550)  

gross profit                               560,900

Admin and general expenses  (98,550)

Selling expenses                      (195,550)

Operating Income:                    266.800‬

Non-operating income:

Interest revenue  87,550

Interest expense (61,550)

Loss from earthquake

damage                (151,550)

non-operating loss                   (125,550)

Income before taxes                  141.250‬

income tax expense (34%)         (48,025)

Net income                                   93,225‬

Explanation:

First, we calcualte net sales,

then the gross profit.

Then, the interest and earthquake will be disclosure separately as they are not operational result. Do not arise from the normal business operations.

Finally, the net income is determined after reducing the income tax expense