Vous êtes sur la page 1sur 5

E4-4 (Multiple-Step and Single-Step) Two accountants for the firm of Allen and Wright are arguing about

the merits of presenting an income statement in a multiple-step versus a singlestep format. The discussion involves the following 2012 information related to Webster Company ($000 omitted). Administrative expense Officers salaries $4,900 Depreciation of office furniture and equipment 3,960 Cost of goods sold 63,570 Rent revenue 17,230 Selling expense Transportation-out 2,690 Sales commissions 7,980 Depreciation of sales equipment 6,480 Sales revenue 96,500 Income tax expense 7,580 Interest expense 1,860 Instructions (a) Prepare an income statement for the year 2012 using the multiple-step form. Common shares outstanding for 2012 total 40,550 (000 omitted). (b) Prepare an income statement for the year 2012 using the single-step form. (c) Which one do you prefer? Discuss. A. Multiple-Step Form Webster Company Income Statement For the Year Ended December 31, 2012 Sales Revenue Cost of goods sold Gross profit on sales Operating Expenses Selling expenses Transportation-out $2,690 Sales commissions 7,980 Depreciation of sales equipment 6,480 $17,150 Administrative expenses Officers salaried $4,900 Dep. of office furniture & equipment 3,960 $8,860 Income from operations Other Revenues and Gaines Rent Revenue Income from operations Other Expenses and Losses Interest Expense Income before income taxes $96,500 63,570 32,930

26,010 $6,920 17,230 24,150 1,860 22,290

Income tax Net income

7,580 $14,710 ====== $.36 ===

Earnings per capital share ($14,710 / 40,550 shares) B.

Single-Step Form Webster Company Income Statement For the Year Ended December 31, 2012 Revenues Sales Revenue Rent revenue Total revenues Expenses Cost of goods sold Selling expenses Administrative expenses Interest expense Income tax expense Total expenses Net Income

$96,500 17,230 $113,730 63,570 17,150 8,860 1,860 7,580 $99,020 $14,710 ====== $.36 ===

Earnings per capital share ($14,710 / 40,550 shares)

C. I prefer the Single-Step Form of Income Statement because of its simplicity and conciseness, easily understood by users, emphasis on total costs and expenses and net income and it does not imply priority of one revenue or expense over another.

E4-12 (Earnings per Share) At December 31, 2011, Schroeder Corporation had the following stock outstanding. 8% cumulative preferred stock, $100 par, 107,500 shares Common stock, $5 par, 4,000,000 shares $10,750,000 $20,000,000

During 2012, Schroeder did not issue any additional common stock. The following also occurred during 2012. Income from continuing operations before taxes Discontinued operations (loss before taxes) Preferred dividends declared Common dividends declared Effective tax rate $21,650,000 3,225,000 860,000 2,200,000 35%

Instructions Compute earnings per share data as it should appear in the 2012 income statement of Schroeder Corporation. (Round to two decimal places.) Schroeder Corporation Income Statement For the Year Ended December 31, 2012 Net income: Income before income tax Income tax (35%*$21,650,000) Income from continuing operations Discontinued operations Loss before income tax $3,225,000 Income tax (35%*3,225,000) 1,128,750 Net income

$21,650,000 7,577,500 14,072,500

2,096,250 $11,976,250 ========= $860,000 4,000,000

Preferred dividends declared Weighted average shares outstanding

Earnings per share Income from continuing operations ($14,072,500-860,000)/4,000,000 Discontinued operations, net of tax ($2,096,250 / 4,000,000) Net income (11,976,250-860,000)/4,000,000

$3.30 (.52) $2.78 ====

P4-1 (Multiple-Step Income, Retained Earnings) Presented below is information related to Dickinson Company for 2012. Retained earnings balance, January 1, 2012 $980,000 Sales revenue 25,000,000 Cost of goods sold 16,000,000 Interest revenue 70,000 Selling and administrative expenses 4,700,000 Write-off of goodwill 820,000

Income taxes for 2012 1,244,000 Gain on the sale of investments (normal recurring) 110,000 Loss due to flood damage-extraordinary item (net of tax) 390,000 Loss on the disposition of the wholesale division (net of tax)440,000 Loss on operations of the wholesale division (net of tax) 90,000 Dividends declared on common stock 250,000 Dividends declared on preferred stock 80,000 Instructions Prepare a multiple-step income statement and a retained earnings statement. Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2012, there were 500,000 shares of common stock outstanding all year. Dickinson Company Income Statement For the Year Ended December 31, 2012 Sales Revenue Cost of goods sold Gross profit Selling and administrative expenses Income from operations Other revenues and gains Gain on the sale of investments 110,000 Interest revenue 70,000 Other expenses and losses Write off of goodwill Income from continuing operations before taxes Income tax Income from continuing operations Discontinued operations Loss on operations, net of tax 90,000 Loss on disposal, net of tax 440,000 Income before extraordinary item Extraordinary item-loss from flood damage, net of tax Net income $25,000,000 16,000,000 9,000,000 4,700,000 4,300,000

180,000 (820,000) 3,660,000 (1,244,000) 2,416,000

(530,000) 1,866,000 (390,000) $1,496,000 ==========

Earnings per share Income from continuing operations ($2,416,000-$80,000) /500,000 shares Discontinued operations Loss on operations, net of tax ($90,000/500,000) ($.18) Loss on disposal, net of tax ($440,000/500,000) ($.88) Income before extraordinary item (1,866,000-80,000)/500,000 Extraordinary loss, net of tax ($390,000/500,000 Net Income ($1,496,000-80,000)/500,000

$4.67

(1.06) $3.61 (.78) $2.83 ====

Dickinson Company Retained Earnings Statement For the Year Ended December 31, 2012 Retained earnings, January 1 Add: Net income Less: Dividends Preferred stocks $80,000 Common stocks 250,000 Retained earnings, December 31 $980,000 1,496,000 2,476,000

330,000 $2,146,000 ========