Q50PGB - Horngren'S Financial And Managerial Accounting

Question

Preparing an income statement

The following information was taken from the records of Arizona Motorsports, Inc. at November 30, 2018:

Learning Objectives 3, 4

1. Nov. 8 Treasury Stock \(36,000

Learning Objective 5

Net Income \)37,840

Selling Expenses

Administrative Expenses

Income from Discontinued Operations

Cost of Goods Sold

Treasury Stock—Common (1,500 shares)

Net Sales Revenue

\( 95,000

150,000

2,400

470,000

19,500

801,400

Common Stock, \)11 Par Value, 13,500 

shares authorized and issued \( 148,500

Preferred Stock, \)2 No-Par Value, 2,000 

shares issued 60,000

Income Tax Expense: Continuing 

Operations 50,000

Income Tax Expense: Income from 

Discontinued Operations 960

Prepare a multi-step income statement for Arizona Motorsports for the fiscal year ended November 30, 2018. Include earnings per share

Step-by-Step Solution

Answer

A multi-step income statement for the fiscal year ended November 30, 2018, shows net income $65,500 and earnings per share is $2.82.

Step 1: Basic Introduction-

Income from Discontinued Operations less applicable tax ($2,400- $960)

Preferred stock (2,000 shares * $2)

No of equity shares issued and outstanding (13,500- 1,500)

Step 2: Multi-step income statement-

Income Statement November 30, 2018
Net Sales Revenue	$801,400
Cost of goods sold	$470,000
Gross Profit	$331,400
Less: Operating Expenses-
Selling Expenses	($95,000)
Administrative Expenses	($150,000)
Operating Income	$86,400
Less: Income Tax Expense: Continuing Operations	($50,000)
Income from Continuing Operations	$36,400
Income from Discontinued Operations less applicable tax	$1,440
Net Income	$37,840
Less: Preferred dividend (4,000 * $2)	($4,000)
Earnings available	$33,840
No of equity shares issued and outstanding (13,500 -1,500)	12,000
Earnings per share (a/b)	$2.82