2 Prepare a multiple step income statement for 2006 including EPS disclosures

2 prepare a multiple step income statement for 2006

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2. Prepare a multiple-step income statement for 2006, including EPS disclosures. The following is a partial trial balance for General Lighting Corporation as of December 31, 2006: Account Title Debits Credits Sales revenue 2,350,000 Rental revenue 80,000 Loss on sale of equipment 22,500 Loss from flood damage (event is both unusual and infrequent) 120,000 Cost of goods sold 1,200,300 Loss from write-down of inventory due to obsolescence 200,000 Salaries expense 300,000 Depreciation expense 100,000 Interest expense 90,000 Rent expense 50,000 300,000 shares of common stock were outstanding throughout 2006. Income tax expense has not yet been accrued, The income tax rate is 40%. Required: 1. Prepare a single-step income statement for 2006, including EPS disclosures. 2. Prepare a multiple-step income statement for 2006, including EPS disclosures. E 4–3 Income statement format; single step and multiple step LO2 LO4 LO6 E 4–2 Income statement format; single step and multiple step LO2 E 4–1 Comprehensive income LO1 BE 4–14 Statement of cash flows; indirect method LO11 BE 4–13 Statement of cash flows; investing and financing activities LO11 CHAPTER 4 The Income Statement and Statement of Cash Flows 193 EXERCISES available with McGraw–Hill Homework Manager spi94029_ch04.qxd 6/27/05 10:16 AM Page 193
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194 SECTION 1 The Role of Accounting as an Information System The trial balance for Lindor Corporation, a manufacturing company, for the year ended December 31, 2006, included the following comprehensive income accounts: Account Title Debits Credits Sales revenue 2,300,000 Gain on early debt extinguishment (unusual and infrequent) 400,000 Cost of goods sold 1,400,000 Selling and administrative expenses 420,000 Interest expense 40,000 Unrealized holding gains on investment securities 80,000 The trial balance does not include the accrual for income taxes. Lindor’s income tax rate is 30%. One mil- lion shares of common stock were outstanding throughout 2006. Required: Prepare a combined multiple-step statement of income and comprehensive income for 2006, including ap- propriate EPS disclosures. The following incorrect income statement was prepared by the accountant of the Axel Corporation: AXEL CORPORATION Income Statement For the Year Ended December 31, 2006 Revenues and gains: Sales $592,000 Interest and dividends 32,000 Gain from early extinguishment of debt 86,000 Total revenues and gains 710,000 Expenses and losses: Cost of goods sold $325,000 Selling expenses 67,000 Administrative expenses 87,000 Interest 26,000 Restructuring costs 55,000 Income taxes 60,000 Total expenses and losses 620,000 Net Income $ 90,000 Earnings per share $ 0.90 Required: Prepare a multiple-step income statement for 2006 applying generally accepted accounting principles. The income tax rate is 40%. The gain from early extinguishment of debt is considered an unusual and infrequent event. Chance Company had two operating divisions, one manufacturing farm equipment and the other office sup- plies. Both divisions are considered separate components as defined by SFAS No. 144. The farm equipment component had been unprofitable, and on September 1, 2006, the company adopted a plan to sell the assets of the division. The actual sale was effected on December 15, 2006, at a price of $600,000. The book value
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