The following balances were taken from the books of Schimank Corp. on December 3

Question

The following balances were taken from the books of Schimank Corp. on December 31, 2014. Interest revenue $120,400 Sales 1,932,000 Selling expenses 271,600 Sales returns and allowances 210,000 Administrative and general expenses 133,800 Sales discounts 63,000 Interest expense 84,000 Loss from earthquake damage (unusual and infrequent stem pre-tax) 210,000 Cost of goods sold 869,400 Common stock 700,000 ***Assume the total effective tax rate on all items is 34%. Prepare a multiple-step income statement and EPS 100,000 shares of common stock were outstanding during the year. Show all key lines of the income statements example; Gross Profit.

Explanation / Answer

Answer:

SCHIMANK CORP. Income Statement For the Year Ended December 31, 2014 Sales revenue: Sales 1932000 Less: Sales returns and allowances 210000 Sales discount 63000 273000 Net sales revenue 1659000 COGS 869400 Gross profit 789600 Operating expenses: Selling expenses 271600 Admin. And general expenses 135800 407400 Income from operations 382200 Other Revenues and Gains: Interest revenue 120400 502600 Other Expenses and Losses: Interest Expenses 84000 Income before taxes and extraordinary item 418600 Income taxes ($418,600 X .34) 142324 Income before extraordinary item 276276 Extraordinary item: Loss from earthquake damage 210000 Less applicable tax reduction (210000*34%) 71400 138600 Net income 137676 Per share of common stock: Income before extraordinary item 2.76 ($276,276 ÷ 100,000) Extraordinary item (net of tax) 1.39 Net income ($137,676 ÷ 100,000) 1.37

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