Question

The adjusted trial balance of Pacific Scientific Corporation on December 31, 2018, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,185; cost of goods sold, $1,410; selling expenses, $200; general and administrative expenses, $190; interest expense, $60; and gain on sale of investments, $155. Income tax expense has not yet been recorded. The income tax rate is 35%. Assume the company’s accountant prepared a multiple-step income statement.

a. What amount would appear in that statement for operating income? Ignore EPS disclosures.
b. What amount would appear in that statement for nonoperating income? Ignore EPS disclosures.

(For all requirements, enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
  

	a. Operating income million b. Nonoperating income million

The adjusted trial balance of Pacific Scientific Corporation on December 31, 2018, the end of the company’s fiscal year, contained the following income statement items ($ in millions): sales revenue, $2,125; cost of goods sold, $1,290; selling expenses, $140; general and administrative expenses, $130; interest expense, $55; and gain on sale of investments, $70. Income tax expense has not yet been recorded. The income tax rate is 35%.

Prepare a multiple-step income statement for 2018. Ignore EPS disclosures. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

	PACIFIC SCIENTIFIC CORPORATION Income Statement For the Year Ended December 31, 2018 0 0 0 0 0

The following is a partial year-end adjusted trial balance.

Account Title	Debits	Credits
Sales revenue		430,000
Loss on sale of investments	48,000
Interest revenue		5,000
Cost of goods sold	225,000
General and administrative expenses	53,000
Restructuring costs	63,000
Selling expenses	31,500
Income tax expense	0

Income tax expense has not yet been recorded. The income tax rate is 40%.

a. Determine the operating income (loss).
b. Determine the income (loss) before income taxes.
c. Determine the net income (loss).

	a. Operating income (loss) b. Income (loss) before income taxes c. Net income (loss)

Answer 1

PACIFIC SCIENTIFIC CORPORATION (in millions)
Multi Step Income Statement
Sales		$2185
Less: Cost of goods sold		-1410
Gross profit		775
Operating expenses:
Selling expense	200
General and administrative expenses	190
Total operating expense		-390
Operating income (loss)		$385
Other income (expenses)
Interest expense	(60)
Gain on sale of investment	155
Total other income		95
Income (loss) before income tax		480
Less: Income tax 35%		-168
Net income (loss)		$312

Operating income= $385 million

Non operating income= Gain on sale of investment- Interest expense

= $155-60= $95 million

PACIFIC SCIENTIFIC CORPORATION (in millions)
Multi Step Income Statement
Sales		$2125
Less: Cost of goods sold		-1290
Gross profit		835
Operating expenses:
Selling expense	140
General and administrative expenses	130
Total operating expense		-270
Operating income (loss)		565
Other income (expenses)
Interest expense	(55)
Gain on sale of investment	70
Total other income		15
Income (loss) before income tax		580
Less: Income tax 35%		-203
Net income (loss)		$377

Multi Step Income Statement
Sales		$430000
Less: Cost of goods sold		-225000
Gross profit		205000
Operating expenses:
General and administrative expenses	53000
Restructuring costs	63000
Selling expenses	31500
Total operating expense		-147500
Operating income (loss)		57500
Other income (expenses)
Loss on sale of investment	-48000
Interest revenue	5000
Total other income		-43000
Income (loss) before income tax		14500
Less: Income tax 40%		-5800
Net income (loss)		$8700

Operating income= $57500

Income (loss) before income taxes= $14500

Net income (loss)= $8700