Exercise 46 The following balances were taken from the books

Exercise 4-6 The following balances were taken from the books of Metlock Corp. on December 31, 2017 Interest revenue Cash Sales revenue Accounts receivable Prepaid insurance Sales returns and allowances Allowance for doubtful accounts Sales discounts Land Equipment Buildings Cost of goods sold $87,100 52,100 1,381,100 151,100 21,100 151,100 8,100 46,100 101,100 201,100 141,100 622,100 Accumulated depreciation-equipment Accumulated depreciation-buildings Notes receivable Selling expenses Accounts payable Bonds payable Administrative and general expenses Accrued liabilities Interest expense Notes payable Loss from earthquake damage Common stock Retained earnings $41,100 29,100 156,100 195,100 171,100 101,100 98,100 33,100 61,100 101,100 151,100 501,100 22,100 Assume the total effective tax rate on all items is 34% Prepare a multiple-step income statement; 100,000 shares of common stock were outstanding during the year. (Round earnings per share to 2 decimal places, e.g 1.48.)

Solution

Metlock corp.

Income statement

sales

Sales revenue

1381100

Less: sales discounts

46100

Sales returns and allowances

151100

197200

Net sales

1183900

Cost of goods sold

622100

Gross profit

561800

Operating expenses

Selling expenses

195100

Administrative and general expenses

98100

293200

Operating income

268600

Non operating functions

Interest revenue

87100

Interest expense

61100

26000

Income before taxes

294600

Income tax

100164

Income from continuing operations

194436

Extraordinary item

Loss from earthquake

99726

Net income

94710

Earnings per share

0.95

Income tax = 294600*34%

Loss from earthquake = 151100*(1-34%)

EPS = 94710/100000 = 0.947 = 0.95

sales
Sales revenue		1381100
Less: sales discounts	46100
Sales returns and allowances	151100	197200
Net sales		1183900
Cost of goods sold		622100
Gross profit		561800
Operating expenses
Selling expenses	195100
Administrative and general expenses	98100	293200
Operating income		268600
Non operating functions
Interest revenue	87100
Interest expense	61100	26000
Income before taxes		294600
Income tax		100164
Income from continuing operations		194436
Extraordinary item
Loss from earthquake		99726
Net income		94710
Earnings per share		0.95