Comprehensive Problem #1: Information below is for the Tiger Eye Corporation for
ID: 2481100 • Letter: C
Question
Comprehensive Problem #1: Information below is for the Tiger Eye Corporation for the year ended December 31, 2015:
Net Sales $2,500,000
Cost of Goods Sold 1,600,000
Selling Expenses 180,000
Administrative Expenses 250,000
Dividend Revenue 45,000
Gain on sale of Equipment 5,000
Interest Expense 12,000
Write-off of obsolete inventory 85,000
Correction for understatement of depreciation expense in prior years 70,000
Extraordinary loss due to fire 95,000
Income from operations of a discontinued segment 120,000
Loss on disposal of discontinued segment 63,000
Dividends declared:
Preferred 200,000
Common 250,000
Retained Earnings, 12/31/2014 1,350,000
There were 600,000 shares of common stock outstanding at the beginning of the year and 800,000 shares outstanding at the end of the year. The income tax rate is 25% for all years.
Required:
(1) Prepare a multi-step income statement for 2015. Include earning per share information.
(2) Prepare a separate statement of retained earnings for 2015.
Explanation / Answer
Tiger Eye Corporation Income Statement For the Year Ended December 31, 2015 Amount Amount Sales revenue $ 2,500,000 Cost of goods sold $ 1,600,000 Gross profit $ 900,000 Selling and administrative expenses $ 430,000 Income from operations $ 470,000 Other revenues and gains: Dividend revenue $ 45,000 Gain on sale of Equipment $ 5,000 Other expenses and losses: Interest Expense $ -12,000 Write-off of obsolete inventory $ -85,000 $ -97,000 Income from continuing operations before income tax $ 423,000 Income tax $ 105,750 Income from continuing operations $ 317,250 Discontinued operations: Income from operations of a discontinued segment, less applicable income tax of $30,000 $ 90,000 Loss on disposal of discontinued segment, less applicable income tax of $15,750 $ -47,250 $ 42,750 Income before extraordinary item $ 360,000 Extraordinary item - loss due to fire, less applicable income tax of $23,750 $ -71,250 Net Income $ 288,750 Less: Preference Dividend $ 200,000 Net Income attributable to Common Stock shareholders $ 88,750 Average Common stock outstanding(0.6+0.8/2 = 0.7M) 700000 EPS $ 0.13 Tiger Eye Corporation Retained Earnings Statement For the Year Ended December 31, 2015 Op Balance $ 1,350,000 Less: Prior period underestimate of Depreciation(Net of Tax) $ -52,500 Adjusted Balance $ 1,297,500 Add: Net Income attributable to Common Stock shareholders $ 88,750 Total $ 1,386,250 Less: Dividend $ 200,000 Closing Balance $ 1,186,250
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