Question

Presented below is information related to ColorCity Inc. for year of 2019 (1/1/2019-12/31/2019). Income from operations of discontinued food departiment (pre-tax) Selling and administrative expenses Interest expenses Net Sales Dividends-Common stock Interest revenues Loss on disposal of discontinued food department (pre-tax Cost of goods sold Dividends-Preferred stock Retained earnings, 1/1 60,000 1,114,000 140,000 3,790,000 56,000 260,000 120,000 1,780,000 125,000 630,000 Instructions 1. Prepare in good form a multiple-step income statement for the year 2019 for ColorCity Inc. Assume a 30% tax rate. Include an appropriate heading for the statement. All subtotals must be titled appropriately (e.g., gross profit, income from operation, etc.). Please note, the items given above are in scrambled order and not all items should be reported on an income statement. Illustration 4-19 (Poquito Industries Inc.) on the slide provides a good example of multi-step income statement. Please make your handwriting clear and neat. 2. Assume that 140,000 shares of common stock were outstanding during the year. Calculate earnings per share based on the net income figure at the bottom of the statement (round to two decimals). Show your work in addition to the answer.

Answer 1

Amount $ Amount $ 37,90,000 (17,80,000) 20,10,000 (11,14,000) 8,96,000 2,60,000 (1,40,000) Multi-step income statement for the year ending 2019 :- Particulars Income from Continuing Operations :- Net sales Less: Cost of goods sold Gross Profit Less: Selling and Administrative expenses Operating Income Add/(Less) Non-Operating income/expense) :- Interest Revenues Less: Interest expense Non-Operating Income (Expenses) Income before taxes from Continuing Operations Less: Income taxes @30% Income from Continuing Operations Income from Dis-continued Operations :- Income from operations of dis-continued food department Loss on disposal of dis-continued food department Net loss before tax from dis-continued operations Add: Income tax benefit @30% Income from Dis-Continuing Operations Net Income 1,20,000 10,16,000 (3,04,800) 7,11,200 60,000 (1,20,000) (60,000) 18,000 (42,000) 6,69,200 Amount $ Earnings per share :: Particulars Net Income Less: Preferrence Dividend Income available for common stockholders No of outstanding common stock Earnings per share 6,69,200 (1,25,000) 5,44,200 1,40,000 3.89