Task 1

The following is summary data in the ledger of XYZ Limited on November 30, 2012. Net sales 1,400,000 Cost of goods sold 800,000 Selling expenses 110,000 Administrative expenses 140,000 Other revenues and gains 40,000 Other expenses and losses 30,000 Your analysis reveals the following additional information that is not included in the above data: The entire ceramics division was closed on September 30. The loss from operations for this division before income tax was $150,000. The ceramics division was sold at a pre-tax gain of $60,000. On June 12, a transport truck crashed into one of the companys plants. This resulted in an extraordinary loss of $90,000 before income tax. During the year, XYX Limited changed its amortization method. The cumulative effect of the change on prior years net income was a decrease of $30,000 before income tax. (Assume that amortization under the new method is correctly included in the ledger data for the current year.) The income tax rate on all items is 30%.

Part 1 Prepare XYZ Limited's income statement for the year ended November 30, 2012.

XYZ Limited Income statement For the year ended November 30, 2012

Part 2 Prepare the earnings per share data that should appear in the income statement, assuming there were 100,000 common shares.

Income from continuing operations
Loss from discontinued operations
Income before extraordinary item
Extraordinary loss
Net income

Task 2

Respond to the following questions in a new document. To support your thinking, review content that was covered in this learning activity.

1. What additional classification of items must appear on a corporations income statement?
2. What are discontinued operations and extraordinary items, and why are they important to report on the income statement?
3. What is EPS (earnings per share), how is it calculated, and why is it important to know?
4. What is meant by common-size and comparative income statements and how do you set them up?
5. What can you learn from common-size and comparative income statements?
6. What is trend analysis and why might a companys management team want to embark on trend analysis?