(8 points) Changes in all of E’s balance sheet accounts during the current year, EXCEPT the change in E’s retained earnings account follow. Compute E’s net income (or net loss) for the year assuming the only two entries E made to her retained earnings account during the year were for a cash dividend declared and paid of $50,000 and her net income (or net loss) for the year. (This is NOT a statement of cash flows problem – do NOT format it like a statement of cash flows problem.)
Cash decreased $250,000
Accounts receivable decreased $ 65,000
Fixed assets increased $165,000
Accumulated depreciation increased $ 90,000
Accounts payable decreased $120,000
Unearned revenue decreased $ 15,000
Notes payable increased $ 80,000
Common stock increased $ 5,000
Additional paid-in-capital increased $100,000
Change in assets: – $250,000 – $65,000 + $165,000 – $90,000 = $240,000 decrease
Change in liabilities: – $120,000 – $15,000 + $80,000 = $55,000 decrease
Therefore, equity had to decrease by $185,000; equity increased by $105,000 due to common stock and APIC; equity decreased by the $50,000 dividend that reduces retained earnings; net loss must have been $240,000.
Pederson, Inc. has the following data for the year ended December 31, 2017:
Net sales $987,000
Loss from discontinued operations 24,000
Cost of goods sold 240,000
Interest expense 11,000
Selling, general, and administrative expenses 325,000
Assume Pederson’s tax rate was 20% on all items. Also assume Pederson had 42,000 shares of common stock outstanding throughout the year. Prepare an income statement in good form for the year 2017. Round your EPS figure to the nearest penny.
Pederson, Inc.
Income Statement
For the Year Ended December 31, 2017
Net sales $987,000
Cost of goods sold 240,000
Selling, general and administrative expenses 325,000
Income from operations 422,000
Interest expense 11,000
Income from continuing operations before taxes 411,000
Income taxes 82,200
Income from continuing operations 328,800
Discontinued operations
Loss, less applicable income tax of $4,800 19,200
Net income $309,600
Per share of common stock
Income from continuing operations $7.83
Loss on discontinued division, net of tax .46
Net income $7.37
(2 points) Penning Corporation reported the following:
Net income $945,000
Dividends on common stock $50,000
Dividends on preferred stock $90,000
Weighted average common shares outstanding 200,000
What should Penning report as its earnings per share? Round your answer to the nearest penny.
$945,000 – $90,000 / 200,000 = $4.275 = $4.28