Answer:
NET INCOME
2021 $0.50
2020 $1.10
Explanation:
Preparation for a multiple-step income statement for the Reed Company for 2021 and 2020
2021 2020
Sales revenue
4,000,000 3,000,000
($4,400,000-400,000) ($3,500,000-500,000)
Cost of goods sold
2,570,000. 1,680,000
(2,860,000-290,000) (2,000,000-320,000)
Goss profit loss
1,430,000 1,320,000
Operating expenses
Administrative expense
750,000 635,000
(800,000 -50,000) (675,000-40,000)
Selling expense
340,000 282,000
(360,000-20,000) (302,000-20,000)
Loss on building 50,000 -
Loss on inventory write down 35,000 -
(40,000-5,000)
Total operating expenses
1,175,000 917,000
Operating income 255,000 403,000
Other income (Expense) :
Interest revenue 150,000 140,000
Interest expenses (200,000) (200,000)
Total other expenses (net) (50,000) (60,000)
Income from continuing operations before income taxes
205,000 343,000
Income tax expenses
51,250 85,750
(25*205,000) (25%*343,000)
Income from continuing operations
153,750 257,250
Discontinued operations :
Income(Loss) from operations of discontinued component
(8,000) 120,000
(40,000-48,000)
Income tax benefit (expense)
3,200 (48,000)
(40%*8,000) (40%*120,000)
Income (loss) on discontinued operations
(4,800) 72,000
Net income
148,950 329,250
Earnings per share :
Income from continuing operations
0.51 0.86
(153,750/300,000) (257,250/300,000)
Discontinued operations
(0.01) 0.24
[(4,800)/300,000] (72,000/300,000)
NET INCOME 0.50 1.10
Operating income =
Gross profit loss - Total operating expenses
Income from continuing operations before income taxes=Operating income+Total other expenses (net)
Income from continuing operations=Income from continuing operations before income taxes-Income tax expenses
Income (loss) on discontinued operations =Income(Loss) from operations of discontinued component +Income tax benefit (expense)
Net income =
(Income from continuing operations +Income (loss) on discontinued operations
NET INCOME=Income from continuing operations +Discontinued operations
Therefore the NET Income for 2021 is $0.50
While the NET INCOME for 2020 is $1.10
