Question

SIS earnings per S I with 2018 performance? Explain. 12-2, L012-5. The followine income statement was prepared by a new and inexperienced employee m the accounting department of Dexter, Inc., a business organized as a corporation 12.30 Unusual Events: A sive Problem DEXTER, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2018 $10,200,000 56,000 710,000 190.000 $11,156,000 Net sales .... Gain on sale of treasury stock Excess of issuance price over par value of capital stock Prior period adjustment (net of income tax).. Total revenue ... Less: Cost of goods sold. Selling expenses ........ General and administrative expenses ........ Loss from settlement of litigation .......... Income tax on continuing operations Operating loss on discontinued operations (net of income tax benefit) ........ Loss on disposal of discontinued operations (net of income tax benefit) .... Dividends declared on common stock... Total costs and expenses.... Net income ..... $4,000,000 1,050,000 840,000 10.000 612,000 180,000 240,000 300,000 7.232,000 $ 3,924,000 Instructions O in the format a. Prepare a corrected income statement for the year ended December 31, 2018, using the illustrated in Exhibit 12-2. Include at the bottom of your income statement all appro earnings per share figures. Assume that throughout the year the company had outstan weighted average of 500,000 shares of a single class of capital stock. b. Prepare a statement of retained earnings for 2018. (As originally reported, retained an December 31, 2017, amount to $3,200,000.) c. What does the $56,000 "Gain on sale of treasury stock" represent? How would you item in Dexter's financial statements at December 31, 2018? Hled, retained earnings at uld you report this

Answer 1

a)

DEXTER INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31,2018
Sales		10200000
less:cost of goods sold		-4000000
Gross margin		6200000
less:selling ,General and administrative expense
selling expense	1050000
,General and administrative expense	840000
Total selling ,,General and administrative expense		(1890000)
Income from operations		4310000
other revenue /(expense)
Loss from settlement of litigation		-10000
Income from continuing operations before tax		4300000
less:Income tax expense		-612000
Income from continuing operations		3688000
Income /(loss)from discontinued operations
Loss from operations of discontinued operations	-180000
Loss from disposal of discontinued operations	-240000
Income /(loss)from discontinued operations		-420000
Net income		3268000
Earning per share
Income from continuing operations [3688000/500000]	7.38
Income /(loss)from discontinued operations [-420000/500000]	-.84
Net income	6.54

Earning per share =[Income/(loss) -preferred dividend paid if any]/weighted average number of common shares outstanding

b)

DEXTER INC. STATEMENT OF RETAINED EARNING FOR THE YEAR ENDED DECEMBER 31,2018
Balance as on January 1,2017	3200000
Prior period adjustment (net of tax)	190000
Net income	3,268,000
Less:dividend declared on common stock	-300,000
Balance as on December 31,2018	6,358,000

c)

Gain on treasury stock means when Treasury stock are reissued at a price higher than its purchase cost (Reissue price> purchase cost) and that gain represent additional paid in capital received from reissue of treasury stock .

So such gain is a part of paid in capital (Stockholders equity ) that is reported in Balance sheet.

**Excess of issue price over par is a par of stockholders equity .