During 2010, Vitos Corporation engaged in two complex transactions to improve the business—selling off a division and retiring bonds. The company has always issued a simple single-step income statement, and the accountant has accordingly prepared the December 31 year-end income statements for 2009 and 2010, as shown below.

Joseph Vitos, the president of Vitos Corporation, is pleased to see that both net income and earnings per share increased by almost 33 percent from 2009 to 2010 and he intends to announce to the company’s stockholders that the plan to improve the business has been successful.

Required

1. Recast the 2010 and 2009 income statements in proper multistep form, including allocating income taxes to appropriate items (assume a 30 percent income tax rate) and showing earnings per share figures (400,000 shares outstanding).

2. What is your assessment of Vitos Corporation’s plan and business operations in 2010?

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Vitos Corporation Income Statements For the Years Ended December 31, 2010 and 2009 2009 2010 $ 2,000,000 (1,100,000) (450,000) (358,200) $ 2,400,000 (1,200,000) (300,000) (270,000) Net sales Cost of goods sold Operating expenses Income taxes expense Income from operations of a discontinued segment Gain on disposal of discontinued segment Extraordinary gain on retirement of bonds 320,000 280,000 144,000 $ 835,800 2$ $ 630,000 1.58 Net income Earnings per share 2.09