P4-1 (Multiple-Step Income, Retained Earnings) The following information is related to Dickinson

Company for 2014.

Retained earnings balance, January 1, 2014 $ 980,000

Sales revenue 25,000,000

Cost of goods sold 16,000,000

Interest revenue 70,000

Selling and administrative expenses 4,700,000

Write-off of goodwill 820,000

Income taxes for 2014 1,244,000

Gain on the sale of investments (normal recurring) 110,000

Loss due to fl ood damage?extraordinary item (net of tax) 390,000

Loss on the disposition of the wholesale division (net of tax) 440,000

Loss on operations of the wholesale division (net of tax) 90,000

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PROBLEMS

Copyright 2013 John Wiley & Sons, Inc.

Problems 197

Dividends declared on common stock $250,000

Dividends declared on preferred stock 80,000

Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing

operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2014,

there were 500,000 shares of common stock outstanding all year.

Instructions

Prepare a multiple-step income statement and a retained earnings statement.

My question is how do you Earnings Per Share

DICKINSON COMPANY Income Statement for the year ended in December 31, 2014 Particulars Amount Sales Cost of goods sold $ 25,000,000.00 $ (16,000,000.00) Gross Profit Selling & Administrative Expenses $ $ 9,000,000.00 (4,700,000.00) Income from operations $ 4,300,000.00 110,000.00 70,000.00 $ 180,000.00 Other expenses & losses: Write-off goodwill $ 820,000.00 Income from continuing operations before income tax Income Tax $ $ 3,660,000.00 (1,244,000.00) Income from continuing operations $ 2,416,000.00 440,000.00 90,000.00 $ 530,000.00 Income before Extraordinary items Extraordinary item, loss from flood damage, net of tax $ $ 1,886,000.00 (390,000.00) Net Income $ 1,496,000.00 Earnings per share: Income from continuing operations $ 4.67 $ $ (0.88) (0.18) $ (1.06) Income before extraordinary item Extraordinary loss, net of tax $ $ 3.61 (0.78) Net Income $ 2.83 $ $ 980,000.00 1,496,000.00 250,000.00 80,000.00 $ 330,000.00 $ 2,146,000.00 Other revenues & gains: Gain on sales of investments Interest revenue $ $ Discontinued Operations: Loss on disposal, net of tax Loss of operations, net of tax $ $ Discontinued operations: Loss on disposal, net of tax Loss of operations, net of tax Dickinson Company Retained Earnings Statement For the year ended January 1, 2014 Particulars Retained Earnings, January 1 Net Income Dividends: Common Stock Preferred Stock Reatined Earnings, December 31 2,416,000-80,000/500,000=4.67 1,886,000-80,000/500,000=3.61 1,496,000-80,000/500,000=2.83 Amount $ $ On the income statement you must subract sales 9,000,000. Then you take the 9,000,000 from the you you income from operation of 4,300,000. No interest revenue which come out to 180,000. You which is 820,000 you add that with you income fr tax of 3,660,000 then subtrack income tax of 1,24 with discontinue operation you would add loss on net of tax which is 440,000 and 90,000 that bring 530,000 and you get 1,886,000 that is your incom item, loss from flood damage, net of tax. You sub sales from cost of goods sold and you come up with m the selling & Administrative Expense which gives 0. Now you add gain on slaes of investment with 0. You have your other expenses write off goodwill ome from continuing operation before income of 1,244,000, that will give you 2,416,000. Now oss on disposal net of tax with loss of operations, brings you 530,000 now you subract 2,416,000 from income before extraordinary items, subtract extraordinary u subtract 390,000 and you net incom 1,496,000 E Shiga Naoya Corporation Income Statement 31-Dec-14 net income Income from continuing operation before taxes 23,650,000 Income tax 23,650,000*35% 8,277,500 Income from continuing operation 15,372,500 Discount operation (loss before taxes) 3,225,000 Less income tax 3,225,000*35% 1,128,750 2,096,250 net income 13,276,250 Perferred dividends declared 1,075,000 Common share outstanding 4,000,000 Earning Per Share Income from continuing operations 15,372,500 - $ 1,075,000/4,000,000 3.57 Discontinued operations, net of tax 2,096,250/4,000,000 0.52 net income 13,276,250 - $1,075,000/4,000,000 3.05 When doing an income statement you have to subtract the income tax from the continuing operation then you subtract the discount operation from tax rate then you would come up with net income put the perferred dividends declared including thhe common share outstanding also take the income continuing operation 15,372,500 subtract 1,075,000 divide it 4,000,000 do the same with discontinued operation 2,096,250 divide it by 4,000,000 when it comes to net income subtract 13,276,250 from 1,075,000 divide by 4,000,000 C. Reither Company Statement of stock equity For the ended in December 31, 2014 Accumulated other retained comprehensive earnings income total beginning balance comprehensive income net income other comprehensive income unrealize holding loss comprehensive income dividends 520,000 90,000 120,000 120,000 -60,000 -10,000 570,000 80,000 common stock 350,000 -60,000 -10,000 200,000 700,000-500,000-80,000=120,000 20,000 350,000 Scott Butler Corporation Balance sheet 31-Dec-14 current asset cash debt investment (trading) account receivable allowances for doubtful accounts inventory total current asset long term investment debt investment equity investment total long term investment property, plants and equipment land buildings accumulated depr. Buildings equipment accumulated depr. Equip. total property, plants and equipment tangible asset franschises patents total tangible asset 197,000 153,000 435,000 -25,000 410,000 597,000 1,357,000 299,000 277,000 576,000 260,000 1,040,000 -152,000 600,000 -60,000 888,000 540,000 1,688,000 160,000 195,000 355,000 3,976,000 Liabilities and Stockholders' Equity current liabilities accounts payable notes payable (short-term) dividens payable accrued liabilities total current liabilities long term debt notes payable (long-term) bonds payable total long-term liabilities total liabilities stockholder's equity paid in capital common stock ($5 par) 1,000,000 paid in capital in excess of par 80,000 retained earnings total retained earning and paid in capital treasury stock total stockholder's equity total liabilities and stockholder's equity computation of retained earnings sales revenue investment revenue gain (extraordinary) cost of good sold selling expenses administrative expense interest expense net income beginnings retained earnings net income ending retained earnings Or ending retained earnings can be computed as follows: total stockholder's equity treasury stock paid in capital in excess of par 455,000 90,000 136,000 96,000 777,000 900,000 1,000,000 1,900,000 2,677,000 1,080,000 410,000 1,490,000 -191,000 1,299,000 3,976,000 8,100,000 63,000 80,000 -4,800,000 -2,000,000 -900,000 -211,000 332,000 78,000 332,000 410,000 -1,299,000 191,000 -1,080,000 410,000 SHABBONA CORPORATION Statement of Cash Flows For the Year Ened December 31, 2014 Cash flows from operating activities net incom Adjustments to reconcile net income to net cash provided by operating activities depr. Expense increase in accounts receivable inventory account payable net cash provided by operating activities cash flows from investing activities sale of land purchase of equipment net cash used by investing activities cash flows from financing activities payment of cash dividends net increase in cash cash at beginning of year cash at end of year 125,000 27,000 -16,000 9,000 -13,000 7,000 132,000 39,000 -60,000 -21,000 -60,000 51,000 22,000 73,000 noncash investing and financing activities issued common stock to retire 50,000 of bonds outstanding 132,000/(34,000+47,000)/2=3.26 132,000/(184,000+247,000)/2=0.61 Free cash flow net cash provided by operating activities less: purchas of equipment dividend 12,000 132,000 -60,000 -60,000 12,000