Question

The following pretax amounts are taken from the adjusted trial balance of Avoca Auto Corp. at December 31, 2020, its annual year-end. Sales revenue $260,000 Cost of goods sold 110,000 Operating expenses 80,000 Gain on debt retirement 20,000 Interest expense 8,000 Loss from discontinued operations 50,000 Retained earnings balance, December 31, 2019 30,000 Dividends declared and paid 25,000 Unrealized holding gain on debt investment securities, net of tax 4,000 Common stock, weighted average shares outstanding 10,000 shares Required a. Prepare a single-step income statement. Assume an average 25% tax rate on all items. Include earnings per share disclosures. b. Prepare a comprehensive income statement by showing a separate but consecutive statement of comprehensive income. Ignore earnings per share disclosures. C. Compute the ending retained earnings balance at December 31, 2020. • Enter revenues and gains and expenses and losses in the order of the largest dollar amount to the smallest dollar amount. • Do not use negative signs with any of your answers. • Round the per share amounts to two decimal places.

Answer 1

Ans 1
Income Statement
For the year ended December 31,2020
Column1	Column2
Revenue and gains
Sales Revenue	$2,60,000
Gain on debt retirement	$20,000
Total revenue and gains A	$2,80,000
Less: Expenses and losses
Cost of good sold	110000
Operating expenses	$80,000
interest expenses	$8,000
Total Expenses and losses B	198000
Income before Income taxes C=A-B	$82,000
Income tax expenses C*.25	$20,500
Income from continuing operations	$61,500
Discountinued operations
Loss from discontinued operations, net of tax savings (50000*.75)	-37500
Net Income	$24,000
ans b
Income Statement
For the year ended December 31,2020
Sales Revenue	$2,60,000
Cost of good sold	110000
Gross profit	$1,50,000
Operating expenses	$80,000
Income from operations	$70,000
Other Revenue and expenses
interest expenses	-$8,000
Gain on debt retirement	$20,000
Total Other Revenue and expenses	$12,000
Income from continuing operations before income taxes C	$82,000
Income tax expenses C*.25	$20,500
Income from countinuing operations	$61,500
Discountinued operations
Loss from discontinued operations, net of tax savings (50000*.75)	-37500
Net Income	$24,000
Unrealized holding gain on debt investment securities net of taxes	4000
Comprehensive Income	$28,000
ans c
Statement of Retained Earnings
Retained Earnings, Beginning balance Jan 1 2020	30000
Add: Net Income	$24,000
	54000
Less: Dividend declared	-25000
Retained Earnings, Ending balannce	29000
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