Exercise 4-6 The following balances were taken from the books of Maria Conchita

Question

Exercise 4-6

The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2014.

Assume the total effective tax rate on all items is 34%.

Prepare a multiple-step income statement; 100,100 shares of common stock were outstanding during the year. (Round earnings per share to 2 decimal places, e.g. 1.48.)

MARIA CONCHITA ALONZO CORP.
Income Statement
For the Year Ended December 31, 2014

Interest revenue $95,750 Accumulated depreciation—buildings $37,750 Cash 60,750 Notes receivable 164,750 Sales revenue 1,389,750 Selling expenses 203,750 Accounts receivable 159,750 Accounts payable 179,750 Prepaid insurance 29,750 Bonds payable 109,750 Sales returns and allowances 159,750 Administrative and general expenses 106,750 Allowance for doubtful accounts 16,750 Accrued liabilities 41,750 Sales discounts 54,750 Interest expense 69,750 Land 109,750 Notes payable 109,750 Equipment 209,750 Loss from earthquake damage
    (extraordinary item) 159,750 Buildings 149,750 Common stock 509,750 Cost of goods sold 630,750 Retained earnings 30,750 Accumulated depreciation—equipment 49,750

Explanation / Answer

MARIA CONCHITA ALONZO CORP.

Income StatementFor the Year Ended December 31, 2014

Sales RevenueSales revenue.......................................................... $1,380,000

Less: Sales returns and allowances.....................   $150,000

Sales discounts...........................................   45,000 195,000

Net sales..................................................................   1,185,000

Cost of goods sold................................................. 621,000

Gross profit on sales....................................................   564,000

Operating ExpensesSelling expenses.................................................   194,000

Administrative and general expenses..............   97,000   291,000

Income from operations..............................................   273,000

Other Revenues and GainsInterest revenue.........................................................86,000   359,000

Other Expenses and LossesInterest expense........................................................60,000

Income before income tax ........................................................... 299,000

Income tax ($299,000x.34)............................................................. 101,660

Income before extraordinary iteams ..................................... 197,340

Extraodinary Items loss for earthquacke damage ................................. $150,000

Less:Applicaation income tax reduction ($150,000x.34) .......................... 51000 99000

Net Income ................................................................. 98,340

Per share of common stock

Income before extraordinary items ($19,340/100,000) ............................... $1.97

Extraordinary items (net tax) .........................................................................(.99)

Net income ($90340/100,000)......................................................................$.98

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