EXERCISE 4 6 3035 minutes MARIA CONCHITA ALONZO CORP Income Statement For the

Exercise 4 6 3035 minutes maria conchita alonzo corp

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EXERCISE 4-6 (30–35 minutes) MARIA CONCHITA ALONZO CORP. Income Statement For the Year Ended December 31, 2014 Sales Revenue       Sales revenue ............................................................. $1,380,000       Less: Sales returns and allowances ........................ $150,000                  Sales discounts ..............................................     45,000      195,000       Net sales ..................................................................... 1,185,000       Cost of goods sold ....................................................      621,000 Gross profit on sales ....................................................... 564,000 Operating Expenses Selling expenses .................................................... 194,000 Administrative and general expenses ..................     97,000      291,000 Income from operations .................................................. 273,000
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EXERCISE 4-6 (Continued) Other Revenues and Gains Interest revenue ........................................................     86,000 359,000 Other Expenses and Losses Interest expense ........................................................     60,000 Income before income tax and extraordinary item ........ 299,000 Income tax ($299,000 X .34) .....................................   101,660 Income before extraordinary item ................................... 197,340 Extraordinary item—loss from earthquake damage ......... $150,000 Less: Applicable income tax reduction  ($150,000 X .34) .......................................................     51,000     99,000 Net income ........................................................................ $  98,340 Per share of common stock: Income before extraordinary item  ($197,340  ÷  100,000) ................................................ $1.97* Extraordinary item (net of tax) ...................................    (.99 ) Net income ($98,340  ÷  100,000) .................................. $  .98 *Rounded
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EXERCISE 4-7 (30–40 minutes) (a) Multiple-Step Form LATIFA SHOE CO. Income Statement For the Year Ended December 31, 2014 Net sales ........................................................ $980,000 Cost of goods sold ........................................   496,000 Gross profit on sales .................................... 484,000 Operating Expenses       Selling expenses             Salaries and Wages ........................... $114,800             Depr. exp. (70% X $65,000) ............... 45,500             Supplies .............................................     17,600 $177,900       Administrative expenses             Wages and salaries ........................... 135,900             Other admin. expenses .....................     51,700             Depr. exp. (30% X $65,000) ...............     19,500   207,100   385,000 Income from operations ............................... 99,000 Other Revenues and Gains       Rent revenue ...........................................     29,000 128,000 Other Expenses and Losses       Interest expense ......................................     18,000 Income before income tax ............................ 110,000       Income tax ...............................................     37,400 Net income ..................................................... $  72,600
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Earnings per share ($72,600  ÷  20,000) ........ $3.63
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EXERCISE 4-7 (Continued) (b) Single-Step Form LATIFA SHOE CO. Income Statement For the Year Ended December 31, 2014 Revenues       Net sales .......................................................................... $   980,000       Rent revenue ...................................................................        29,000             Total revenues ..........................................................   1,009,000 Expenses       Cost of goods sold ......................................................... 496,000       Selling expenses ............................................................ 177,900       Administrative expenses ............................................... 207,100       Interest expense .............................................................        18,000             Total expenses .........................................................      899,000 Income before income tax ................................................... 110,000       Income tax .......................................................................        37,400 Net income ............................................................................ $     72,600 Earnings per share ($72,600  ÷  20,000) ............................... $3.63 Note:  An alternative income statement format for the single-step form is to show income tax as part of expenses, and not as a separate item.
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