Question

Credits Problems. (Total 50 Points) Problem 1. The trial balance of Lakewood Inc. included the following accounts as of December 31, 2016: Debits Sales revenue 1,800,000 Interest revenue 800,000 Gain on sale of investments 50,000 Cost of goods sold 1,100,000 Selling expenses 220,000 Impairment loss from equipment 30,000 Restructuring costs 150,000 Interest expense 40,000 General and administrative expenses 50,000 Operating loss for discontinued operation 50,000 until the disposal date Disposal loss on the discontinued 10,000 operation Lakewood Inc. had 100,000 shares of stock outstanding throughout the year. Income tax expense has not yet been accrued. The effective tax rate is 30%. Required: Prepare a multiple-step income statement including earnings per share disclosure.

Answer 1

Lakewood Inc.
INCOME STATEMENT
For the year ended Dec 31,2016
Sales revenue		1,800,000
Cost of goods sold		-1,100,000
Gross profit		700,000
Operating expenses:
Selling expenses	220,000
Restructuring costs	150,000
General and administrative expense	50,000
Total Operating expenses		420,000
Operating income		280,000
Non-operating income (expense):
Impairment loss from equipment		-30,000
Interest expense		-40,000
Income from continued operations		210,000
Income (loss) from discontinued operations:
Operating loss for discontinued operations		-50,000
Disposal loss on the discontinued operation		-10,000
Income before income tax		150,000
Income tax expense (150,000 x 30%)		-45,000
Net income		105,000
EPS ($105,000/100,000 shares)		1.05