Question

The following information was taken from the records of Whispering Inc. for the year 2020: Income tax applicable to income from continuing operations $243,100; income tax applicable to loss on discontinued operations $33,150, and unrealized holding gain on available-for-sale securities (net of tax) $19,500.
Gain on sale of equipment $ 123,500
Cash dividends declared $195,000
Loss on discontinued operations 97,500
Retained earnings January 1, 2020 3,480,000
Administrative expenses 312,000
Cost of goods sold 1,105,000
Rent revenue 52,000
Selling expenses 390,000
Loss on write-down of inventory 78,000
Sales Revenue 2,470,000
Shares outstanding during 2020 were 100,000.
Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a comprehensive income statement for 2017, using the two statement format.

Answer 1

Answer:

a) Whispering, Inc.

Income statement

For the year ended December 31, 2020

Sales Revenue                                                          $2,470,000

Cost of goods sold                                                   ($1,105,000)

Loss on write-down of inventory                               ($78,000 )

Gross profit                                                                $1,287,000

Operating expenses:

• Administrative expenses $312,000
• Selling expenses $390,000                             ($702,000)

Operating income                                                       $585,000

Other income/expenses:

Rent revenue                                                                 $52,000

Gain on sale of equipment                                          $123,500

Income before taxes                                                   $760,500

Income taxes                                                               ($243,100)

Net income from continuing operations                     $517,400

Discontinued operations:

• Loss on discontinued operations ($97,500)
• Income tax applicable to loss          $33,150     ($64,350)          

Net income                                                                  $453,050

Other comprehensive income:

Unrealized holding gain on AFS securities (net)         $19,500

Comprehensive income                                             $472,550

Shares outstanding during 2020 were                       100,000

Earnings per share                                                       $4.7255

Cash dividends declared                                           $195,000

Dividends per share                                                          $1.95

b) Whispering, Inc.

Comprehensive Income Statement

For the year ended December 31, 2020

Net income                                                                  $453,050

Other comprehensive income:

Unrealized holding gain on AFS securities (net)         $19,500

Comprehensive income                                             $472,550