Question

Exercise 4-09 Presented below is information related to Ivan Calderon Corp. for the year 2020. Net sales $1,300,000 Write-off of inventory due to obsolescence $80,000 Cost of goods sold 780,000 Depreciation expense omitted by accident in 2019 55,000 Selling expenses 65,000 Casualty loss 50,000 Administrative expenses 48,000 Cash dividends declared 45,000 Dividend revenue 20,000 Retained earnings at December 31, 2019 980,000 Interest revenue 7,000 Effective tax rate of 20% on all items Prepare a multiple-step income statement for 2020. Assume that 60,000 shares of common stock are outstanding for the entire year. (Round earnings per share to 2 decimal places, e.g. 1.49.)

Answer 1

Answer:

Sales revenue 1,300,000

COGS                780,000

Gross Profit       520,000

Operating expense

Selling expenses              65,000

Administrative expenses 48,000

Write-off of inventory due to obsolescence 80,000

             total operating expense   193,000

Operating Income                           327,000

Non-operating income:

Dividend revenue 20,000

Interest revenue      7,000

Casualty loss       (50,000)

non-operating    (23,000)

income before taxes                   304,000

income tax expense 20%            (60,800)

Net Income                                  243,200

earnings per share: 243,200 / 60,000 =  4,05

Explanation:

we subtract form the revenues the expenses.

we made the distinction between opeating activities andthose which aren't.

The prior period adjustment is done directly to retained earnings it do not imapct the current period as if does, it will be a violation of the matching principles to recognie expense of 2019 in 2020.