Question

The following is a partial trial balance for General Lighting Corporation as of December 31, 2018:

Partial Trial Balance

Account Title	Debits	Credits
Sales revenue		2,350,000.00
Interest revenue		80,000.00
Loss on sale of investments	22,500.00
Cost of goods sold	1,200,300.00
Loss from write-down of inventory due to obsolescence	200,000.00
Selling expenses	300,000.00
General and administrative expenses	150,000.00
Interest expense	90,000.00

300,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40 percent.

Using the partial trial balance provided and considering the scenario, respond to the following prompts:

• Prepare a single-step income statement for 2018, including EPS disclosures.
  
• Prepare a multiple-step income statement for 2018, including EPS disclosures.

Answer 1

1.

General Lighting Corporation
Income Statement (Single-step)
For the Year Ended December 31, 2018
Revenues
Sales revenue	2,350,000
Interest revenue	80,000
Total revenues		2,430,000
Cost of goods sold	1,200,300
Selling expenses	300,000
General and administrative expenses	150,000
Interest expense	90,000
Loss on sale of investments	22,500
Loss from write-down of inventory due to obsolescence	200,000
Total expenses		-1,962,800
Income before income tax		467,200
Income tax expense ( Profit before tax tax x Income tax rate) ( 467,200 x 40%)		-186,880
Net Income		$280,320
Per share of common stock:
Earning per share ( Net Income / Number of common shares) ( 280,320/300,000)		$0.93

2.

General Lighting Corporation
Income Statement (Multi-step)
For the Year Ended December 31, 2018
Revenues
Sales revenue		2,350,000
Cost of goods sold		-1,200,300
Gross profit		1,149,700
Operating expenses:
Selling expenses	-300,000
General and administrative expenses	-150,000
Total Operating expenses		-450,000
Income from operations		699,700
Other revenues and Gains:
Interest revenue	80,000
Other expenses and Losses:
Interest expense	-90,000
Loss on sale of investments	-22,500
Loss from write-down of inventory due to obsolescence	-200,000
		-232,500
Income before income tax		467,200
Income tax expense ( Profit before tax tax x Income tax rate) ( 467,200 x 40%)		-186,880
Net Income		$280,320
Per share of common stock:
Earning per share ( Net Income / Number of common shares) ( 280,320/300,000)		$0.93

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