Q12SE - Horngren'S Financial And Managerial Accounting

Question

Preparing a corporate income statement

ABC Corporation’s accounting records include the following items, listed in no particular order, at December 31, 2018:

Other Income and (Expenses) \( (7,200) Cost of Goods Sold \) 30,000

Net Sales 81,000 Operating Expenses 25,000

Gain on Discontinued Operations 3,600

The income tax rate for ABC Corporation is 39%.

Prepare ABC’s income statement for the year ended December 31, 2018. Omit earnings per share. Use the multi-step format.

Step-by-Step Solution

Answer

The net Incomeof the company asper the multi-step income statement is $13,664.

Step 1: Basic Introduction-

Income statement is a financial statement of a company that is used for the analyses of financial position of the company. It includes all the revenues and expenses and determines whether the company incurred net income or loss at the end of the financial year.

Step 2: Income statement of ABC Corporation

ABC Corporation Income Statement Dec 31, 2018
Net sales	$81,000
Cost of Goods Sold	($30,000)
Gross profit	$51,000
Less Operating Expenses	($25,000)
Operating Income	$26,000
Less: Other Income and (Expenses)	($7,200)
Income before Interest and tax	$18,800
Less: Income tax	($7,332)
Income from continuing operation	$11,468
Add: Gain on Discontinued Operations ($3,600*39%)	$2,196
Net Income	$13,664