Question

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10. (3.5 points) Chang Company reported the following for the year ended December 31, 2018: Gross sales revenue $750,000 Sales returns $ 30,000 Cost of goods sold $250,000 Selling and administrative expenses $100,000 Gain on disposal of the battery division; considered a discontinued operation $ 20,000 Loss from operations of the battery division $ 60,000 Interest expense $ 40,000 Gain on the sale of a fixed asset $ 10,000 Assume Chang's income tax rate was 20% on all items. Also assume Chang had 140,000 shares of common stock outstanding throughout 2018. Prepare Chang's income statement in good form for the year ended December 31, 2018. Round any earnings per share figures to the nearest penny. The definition of “good form” includes, but is not limited to, showing $ signs when appropriate, showing underlines when appropriate, and showing double underlines when appropriate. You can use illustration 4.8 in your textbook as an example of “good form” in income statement preparation.

Answer 1

Answer:

Chang Company
Income Statement
For the year ended Decemeber 31,2018
Sales Revenue	750,000
Less: Sales Returns	-30,000
Net Sales Revenue		720,000
Less: Cost of Goods Sold		(250,000)
Gross Margin		470,000
Less: Selling and Administrative Expenses		(100,000)
Income From Operations		370,000
Other Income / (Expenses) :
Interest Expense	(40,000)
Gain on Sale of Fixed Asset	10,000
Total Other Income / (Expenses)		(30,000)
Income From Continuing Operations Before Tax		340,000
Less: Income Tax Expense (340,000 * 20 %)		(68,000)
Income From Continuing Operations		272,000
Discontinued Operations :
Gain on Disposal of the Battery Division, Net of Tax (20,000 * (1-20))	16,000
Loss from Operations of the Battery Division, Net of Tax (-60,000* (1-20))	(48,000)
Income Form Discontinued Operations		(32,000)
Net Income		240,000
Earnings Per Share:
Incoem form Continuing Operations [272,000 / 140,000]		1.94
Incoem form Discontinuing Operations [-32,000 / 140,000]		(0.23)
Net Earnings Per Share		1.71