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chpt 4 supp sol - Chapter 4 Supplemental Solutions Exercise...

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Chapter 4 Supplemental Solutions Exercise 4-3 Requirement 1 GENERAL LIGHTING CORPORATION Income Statement For the Year Ended December 31, 2006 Revenues and gains: Sales .................................................................. $2,350,000 Rental revenue .................................................. 80,000 Total revenues and gains ............................... 2,430,000 Expenses and losses: Cost of goods sold ............................................ $1,200,300 Salaries .............................................................. 300,000 Depreciation ....................................................... 100,000 Interest ............................................................... 90,000 Rent ................................................................... 50,000 Loss on sale of equipment ................................ 22,500 Loss from inventory write-down ...................... 200,000 Income tax expense * ........................................ 186,880 Total expenses and losses .............................. 2,149,680 Income before extraordinary item ....................... Extraordinary item: Loss from flood damage (net of $48,000 tax benefit) Net income .......................................................... 280,320 (72,000 ) $ 208,320 Earnings per share: Income before extraordinary item ....................... Extraordinary loss ............................................... Net income .......................................................... $ .93 (.24 ) $ .69 * 40% x $467,200
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Exercise 4-3 (concluded) Requirement 2 GENERAL LIGHTING CORPORATION Income Statement For the Year Ended December 31, 2006 Sales revenue ....................................................... $2,350,000 Cost of goods sold ............................................... 1,200,300 Gross profit .......................................................... 1,149,700 Operating expenses: Salaries .............................................................. $300,000 Depreciation ...................................................... 100,000 Rent ................................................................... 50,000 Loss from inventory write-down ...................... 200,000 Total operating expenses ............................... 650,000 Operating income ................................................ 499,700 Other income (expense): Rental revenue .................................................. 80,000 Loss on sale of equipment ................................ (22,500) Interest expense ................................................ (90,000 )
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