The following balances were taken from the books of Sage Corp. on December 31, 2

Question

The following balances were taken from the books of Sage Corp. on December 31, 2017. Interest revenue $88,100 Accumulated depreciation—equipment $42,100 Cash 53,100 Accumulated depreciation—buildings 30,100 Sales revenue 1,382,100 Notes receivable 157,100 Accounts receivable 152,100 Selling expenses 196,100 Prepaid insurance 22,100 Accounts payable 172,100 Sales returns and allowances 152,100 Bonds payable 102,100 Allowance for doubtful accounts 9,100 Administrative and general expenses 99,100 Sales discounts 47,100 Accrued liabilities 34,100 Land 102,100 Interest expense 62,100 Equipment 202,100 Notes payable 102,100 Buildings 142,100 Loss from earthquake damage 152,100 Cost of goods sold 623,100 Common stock 502,100 Retained earnings 23,100 Assume the total effective tax rate on all items is 34%. Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year.

Explanation / Answer

Prepare a multiple-step income statement

Revenue Sales revenue 1382100 Less: Sales returns and allowances -152100 Less: Sales discount -47100 Net Sales 1182900 Less: Cost of goods sold -623100 Gross profit 559800 Less: Operating expense Selling expenses -196100 Administrative and general expenses -99100 Total operating expense -295200 Operating income 264600 Other revenue and expense Interest revenue 88100 Interest expense -62100 26000 Income from continuing operating before tax 290600 Less: Income tax -98804 Income from continuing operation 191796 Extraordinary loss (152100*66%) -100386 Net income 91410 Share outstanding 100000 Earning per share 0.91

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