Question

Presented below is information related to Donaldson Corp., for the year 2017. Net sales $1,950,000 Cost of goods sold 1,200,000 Selling expenses 95,000 Administrative expenses 70,000 Dividend revenue 30,000 Interest revenue 20,000 Interest expense 45,000 Write-off of goodwill due to impairment 75,000 Depreciation expense omitted in 2015 105,000 Dividends declared 120,000 Effect on prior years of change in accounting principle (credit) 220,000 Loss from operations of discontinued component of business 240,000 Gain from disposal of component of business 300,000 Federal tax rate of 30% on all items Prepare a multiple-step income statement for 2017. Assume the 200,000 shares of common stock were outstanding during 2017. (Round earnings per share to 2 decimal places, e.g. 5.25.)

Answer 1

Answer:

$\left[\begin{array}{ccc} Net Sales&&1950000\\ Cost of Goods sold&&1200000\\ Gross Profit&&750000\\ Operating Expenses:&&\\ selling expenses&&95,000\\ Administrative expenses&&70,000\\ Operating Profit&&585000\\\\ Other Revenues and Gains&&\\ Dividend Revenue&30000&\\ Interest Revenue&20000&50000\\&&635000\\ Other expenses and losses&&\\ Interest expense&45000&\\ goodwill impairment&75000&120000\\Income before Income tax&&515000\\\end{array}\right]$

$\left[\begin{array}{ccc} Income before Income tax&&515000\\ Income tax&&154500\\ Income from continued operations&&360500\\&&\\ Discountinued&&\\ Gain at disposal&300000&\\ Loss from operations&220000&80000\\ Income tax&&24000\\ Income from Discontinued operations&&56000\\&&\\ Net Income&&416500\\ Outstanding Shares &20,000&\\EPS&&20.825\\\end{array}\right]$

Explanation:

The ommited depreciation expense and prior years change will not impact the current income statemnt these wil go directly against retained earnings as we will in vilation of the accounting principle of mathcing the expenses at the time they occur.

First, we solve for gross profit

Then, for other revnues and expense and the income from continued operations

The discounted operations are listed net of taxes

Then, we solve for the net incoem and EPS which si the quotient between the net income and the earnings per share.