Multiple-Step Income Statement

Chapter 4: E4-8,
Instructions
(a) Prepare a multiple-step income statement for 2012. Assume that 60,000 shares of common stock are outstanding.
Brokaw Corp
Income Statement
For The Year Ended December 31, 2012 Sales Revenue Net Sales $1,200,000 Cost of Goods Sold 780,000 Gross Profit 420,000 Operating Expenses Selling Expenses $65,000 Administration Expenses $48,000 113,000 Income from operations 307,000 Other revenues and gains Dividend Revenues 20,000 Interest Revenues 7,000 27,000 334,000 Other expenses and losses Write-off of inventory due to obsolescence 80,000 80,000 Income before income tax and extraordinary item 254,000 Income tax 86,360 Income before Extraordinary Item 167,640 Extraordinary Items: Casualty loss 50,000 Less: Income tax reduction 17,000 33,000 Net Income 134,640

Per shares of common stock: Income before extraordinary item: (167,640/60,000) $2.79 Extraordinary item, net of tax: (33,000/60,000) .55 Net Income (134,640/60,000) 2.24

(b.) Prepare a retained earnings statement for 2012.
Brokaw Corp.
Retained Earnings Statement
For the Year Ended December 31, 2012

Retained Earnings, Jan. 1, as reported $980,000 Correction for overstatement of net income in prior period(-13600 tax) 26,400 Retained earnings, Jan. 1 as adjusted 953,600 Add: Net Income 134,640 1,088,240 Less: Dividends declared 45,000 Retained earnings, Dec. 31 1,043,240 P4-1,
Prepare a multiple-step