Question

Lehman Company has the following income statement information for the years 2011- 2013: 2011 Income 2012 Income 2013 Income Statement as Statement as Statement Sales Reported Totals Reported 10.000.000 Cost of Goods Sold 12.500.000 13.000.000 6,200,000 Gross Profit 7.250.000 8,060,000 3,800,000 5.250.000 4,940,000 Operating Expenses 2,100,000 2.835.000 2.519.000 Income from Operations 1.700.000 2.415.000 2,421,000 Non-Operating Items (220.000) (170.000) [250.000) Income from Continuing Operations 1,480,000 2.245.000 2,171,000 Income Tax Expense 296,000 561.000 478.000 Net Income 1,184,000 1,684,000 1,693.000 During 2013, Lehman disposed of its manufacturing division. This division qualifies as a component of the entity and was sold outright to an unrelated company. The sale was finalized on November 1, 2013. The book value of the manufacturing division was $20.8 million and it was sold for $21.6 million. Operating results for the manufacturing division for 2011-2013 (through the disposal date of November 1, 2013) are as follows: 2011 2012 2013 Sales 1.200,000 1.300.000 1,050,000 Cost of Goods Sold 650,000 715,000 588.000 Gross Profit 550.000 585,000 462,000 Operating Expenses 310.000 351,000 334,000 Income from Operations 240,000 234,000 128.000 Income Tax Expense 48,000 58.000 30.000 Net Income 192,000 176.000 98,000 The 2013 manufacturing division's results of operations are included in the 2013 Income Statement totals given above. Lehman had 100,000 shares of common stock outstanding for all of 2011 & 2012. During 2013, the company executed a 2 for 1 stock split. Lehman is a calendar year company. Required: Prepare in good form the 2013 Income Statement showing 2011 and 2012 Income Statements for comparative purposes. Show basic earnings per share amounts for each year for all items requiring such disclosure in the financial statements.

Answer 1

Income statement

particulars	2011	2012	2013
sales	10,000,000	12,500,000	13,000,000
cost of good sold	6,200,000	7,250,000	8,060,000
gross profit	3,800,000	5,250,000	4,940,000
operating expanses	2,100,000	2,835,000	2,519,000
income from operations	1,700,000	2,415,000	2,421,000
non operating items	(220,000)	(170,000)	(250,000)
profit on sale of manufacturing unit	--	-	800,000
income from continuing operations	1,480,000	2,245,000	2,971,000
income tax expanses	(296,000)	(561,000)	(4,78,000)
net income	1,184,000	1,684,000	2,493,000
number of shares	100,000	100,000	200,000
basic earning per share	11.84	16.84	12.465

working note 1

Amount of profit on sale of manufacturing unit is calculated by subtracting book value (20.8 million) from sale value(21.6 million)

working note 2

basic earning per share is calulated by dividing  net income with  number of shares.In 2013,Lehman split 1 share in 2.so,number of shares in 2013 are double than 2011 & 2012.

Here,no information provided in relation to income tax on profit of sale of manufacturing division.so,we ignore it.