Question 1

Company XYZ had the following information during 2020:

1. Beginning inventory was $50,000. Purchases of inventory was $120,000. Ending inventory was 35% of beginning inventory at the end of the year.

2. Cash on hand was $325,000.

3. Sales revenue was $225,000.

4. Operating expenses were half of cost of goods sold.

5. Income tax rate was 20%.

Prepare an income statement for 2020 using the (1) single-step approach and (2) multiple-step approach. What are the advantages and disadvantages of each?

Question 2

Company XYZ had the following information in their stockholders equity section of the balance sheet during 2020:

1) 5% preferred stock, $10 par, 10,000 shares: $100,000

2)Common stock, $0.01 par, 5,000,000 authorized shares, 3,000,000 outstanding shares: $30,000

3)Retained earnings: $122,500

The company had net income of $21,300 for the year. They declared and paid preferred dividends of $5,000. They also declared and paid dividends to common shareholders of $3,200. Compute EPS.