4. Porter Corporation\'s capital structure consists of 50,000 shares of common s
ID: 2481487 • Letter: 4
Question
4. Porter Corporation's capital structure consists of 50,000 shares of common stock. At December 31, 2010 an analysis of the accounts and discussions with company officials revealed the following information: Sales $1,100,000 Purchase discounts 18,000 Purchases 642,000 Earthquake loss (net of tax) (extraordinary item) 42,000 Selling expenses 128,000 Cash 60,000 Accounts receivable 90,000 Common stock 200,000 Accumulated depreciation 180,000 Dividend revenue 8,000 Inventory, January 1, 2010 152,000 Inventory, December 31, 2010 125,000 Unearned service revenue 4,400 Accrued interest payable 1,000 Land 370,000 Patents 100,000 Retained earnings, January 1, 2010 290,000 Interest expense 17,000 General and administrative expenses 150,000 Dividends declared 29,000 Allowance for doubtful accounts 5,000 Notes payable (maturity 7/1/13) 200,000 Machinery and equipment 450,000 Materials and supplies 40,000 Accounts payable 60,000 The amount of income taxes applicable to ordinary income was $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000. Instructions (a) Prepare a multiple-step income statement. (b) Prepare a retained earnings statement.
Explanation / Answer
Multistep income statement :
Cost of goods sold = Beginning inventory +Purchase -Purchase discount -ending inventory
= 152000 + 642000 - 18000 - 125000
= 651000
Retained earning :
sales 1,100,000 LesS:cost of goods sold 651000 Gross margin 449000 Less:Operating expenses selling expenses 128000 General and administration expense 150000 278000 Operating income 171000 Less:tax 48600 operating income net of tax 122400 other income /expense Interest expense -17000 Loss due to earthquake -42000 Dividend revenue 8000 -51000 net income 71400Related Questions
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