The following incorrect income statement was prepared by the accountant of the A
ID: 2407873 • Letter: T
Question
The following incorrect income statement was prepared by the accountant of the Axel Corporation:
Required:
Prepare a multiple-step income statement for 2018 applying generally accepted accounting principles. The income tax rate is 40%.
Income Statement
For the Year Ended December 31, 2018 Revenues and gains: Sales $ 650,000 Interest and dividends 38,000 Gain on sale of investments 85,000 Total revenues and gains 773,000 Expenses and losses: Cost of goods sold $ 355,000 Selling expenses 65,000 Administrative expenses 85,000 Interest 32,000 Restructuring costs 61,000 Income taxes 70,000 Total expenses and losses 668,000 Net Income $ 105,000 Earnings per share $ 1.05
Explanation / Answer
Answer
AXEL CORPORATION
Income Statement
For the Year Ended December 31, 2018
A
Sales Revenue
$ 6,50,000.00
B
Cost of goods sold
$ 3,55,000.00
C=A-B
Gross Profits
$ 2,95,000.00
Operating Expenses:
Selling expenses
$ 65,000.00
Administrative expenses
$ 85,000.00
D
Total Operating expense
$ 1,50,000.00
E = C - D
Operating Income
$ 1,45,000.00
Other revenues & Expenses:
Interest and dividends
$ 38,000.00
Gain on sale of investments
$ 85,000.00
Interest
$ (32,000.00)
F
Restructuring costs
$ (61,000.00)
$ 30,000.00
G = E + F
Net Income before Income taxes
$ 1,75,000.00
H = G x 40%
Income Tax expenses [40%]
$ 70,000.00
I = G - H
Net Income
$ 1,05,000.00
Earning per share
$ 1.05
AXEL CORPORATION
Income Statement
For the Year Ended December 31, 2018
A
Sales Revenue
$ 6,50,000.00
B
Cost of goods sold
$ 3,55,000.00
C=A-B
Gross Profits
$ 2,95,000.00
Operating Expenses:
Selling expenses
$ 65,000.00
Administrative expenses
$ 85,000.00
D
Total Operating expense
$ 1,50,000.00
E = C - D
Operating Income
$ 1,45,000.00
Other revenues & Expenses:
Interest and dividends
$ 38,000.00
Gain on sale of investments
$ 85,000.00
Interest
$ (32,000.00)
F
Restructuring costs
$ (61,000.00)
$ 30,000.00
G = E + F
Net Income before Income taxes
$ 1,75,000.00
H = G x 40%
Income Tax expenses [40%]
$ 70,000.00
I = G - H
Net Income
$ 1,05,000.00
Earning per share
$ 1.05
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