Question E4-17_a - Intermediate Accounting (Kieso)

Question

The following information was taken from the records of Roland Carlson Inc. for the year 2017: income tax applicable to income from continuing operations \(187,000, income tax applicable to loss on discontinued operations \)25,500, and unrealized holding gain on available-for-sale securities (net of tax) \(15,000. 

Gain on sale of equipment \)95,000      Cash dividends declared    $150,000

Loss on discontinued operations75,000 Retained earnings January1,2017 600,000

Administrative expenses               240,000       Cost of goods sold     850,000

Rent revenue                                   40,000          Selling expenses       300,000

Loss on write-down of inventory 60,000          Sales revenue             1,900,000

Shares outstanding during 2017 were 100,000.

Instructions

1. Prepare a single-step income statement.
2. Prepare a comprehensive income statement for 2017 using the two statement format.
3.  Prepare a retained earnings statement for 2017.

Step-by-Step Solution

Answer

1.  Net income of the company is $348,500.

Single-step income statement

A single-step income statement refers to a report that represents the net income of a business concern in a simplified manner by considering its revenues and expenses for a specific period. 

Preparation of Single-Step Income statement

Roland Carlson Inc.
Income Statement
For the year ended 2017
Particulars	Amounts ($)
Sales revenue	1,900,000
Rent Revenue	40,000
Total revenues	1,940,000
Less: Expenses
Cost of Goods Sold	(850,000)
Selling Expense	(300,000)
Administrative Expense	(240,000)
Total expenses	1,390,000
Income from continuing operations before Income tax	550,000
Income Tax	(187,000)
Income from continuing operations	363,000
Discontinued operations
Loss on discontinued operations	75,000
Less: Income tax	(25,500)
Loss from discontinued operations	49,500
Income before extraordinary items (363,000-49,500)	313,500
Extraordinary item
Gain on Sale of equipment	95,000
Less: Loss on Write-down of Inventory	(60,000)
Net extraordinary gain	35,000
Net Income	$348,500
Per Share
Income from continuing operations (363,000/100,000)	3.63
Loss on discontinued operations (49,500/100,000)	(0.50)
Gain on extraordinary income (35,000/100,000)	0.35
Net Income (348,500/100,000)	3.49