Question 2BE - Intermediate Accounting (Kieso)

Question

Brisky Corporation had net sales of \(2,400,000 and interest revenue of \)31,000 during 2017. Expenses for 2017 were cost of goods sold \(1,450,000, administrative expenses \)212,000, selling expenses \(280,000, and interest expense \)45,000. Brisky’s tax rate is 30%. The corporation had 100,000 shares of common stock authorized and 70,000 shares issued and outstanding during 2017. Prepare a single-step income statement for the year ended December 31, 2017.

Step-by-Step Solution

Answer

The Earning per share is $4.44.

Meaning of Sales

Sales refer to the transactions where one party provides products, services, and assets in return for money. 

Preparing Single-step income statement for Brisky Corporation

Brisky Corporation
Income Statement
For the year ended December 31, 2017
Revenues
Net Sales	$2,400,000
Interest Revenue	$31,000
Total Revenues (A)	$2,431,000
Expenses
Cost of Goods Sold	$1,450,000
Selling Expenses	$280,000
Administrative Expenses	$212,000
Interest Expense	$45,000
Income Tax Expense	$133,200
Total Expenses (B)	$2,120,200
Net Income (A-B)	$310,800
Earnings per Share	$4.44

 

Working Notes:

1. Calculation of Income Tax Expense

$\begin{array}{rcl}\mathrm{Net} \mathrm{Income} \mathrm{Expense}& =& (\mathrm{Total} \mathrm{Revenue}-\mathrm{COGS}-\mathrm{Selling} \mathrm{Expense}-\mathrm{Administartion} \mathrm{Expense}-\mathrm{Interest} \mathrm{Expense})\times \mathrm{Tax} \mathrm{rate}\\ & =& (\$2,431,000-\$1,450,000-\$280,000-\$212,000-\$45,000)\times 30\%\\ & =& \$133,200\end{array}$

Calculation of Earnings per share (EPS)

$\begin{array}{rcl}\mathrm{Earning} \mathrm{Per} \mathrm{share}& =& \frac{\mathrm{Net} \mathrm{Income}}{\mathrm{Outstanding} \mathrm{Common} \mathrm{Stock}}\\ & =& \frac{\$310,800}{70,000 \mathrm{Shares}}\\ & =& \$4.44\end{array}$