Multiple-step Income, Retained Earnings
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(Multiple-step Income, Retained Earnings) Presented blow is information related to American Horse Company for 2007
Retained earnings balance, January 1, 2007 $980,000
Sales for the year $25,000,000
Cost of goods sold $17,000,000
Interest revenue $70,000
Selling and administrative Expenses $4,700,000
Write-off of goodwill (not tax deductible) $820,000
Income taxes for 2007 $905,000
Gain on the sale of investments (normal recurring) $110,000
Loss due to flood 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
Dividends declared on common stock $250,000
Dividends declared on preferred stock $70,000
Instructions
Prepare a multiple-step income statement and a retained earnings statement. American Horse Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, American Horse sold the wholesale operations to Rogers Company. During 2007, During 2007, there were 300,000 shares of common stock outstanding all year.
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Solution Summary
The solution explains how to prepare a multiple-step income statement and a statement of retained earnings.
Solution Preview
Please see the attached file.
American Horse Company
Income Statement
For the Year Ended December 31, 2007
Sales $25,000,000
Less cost of goods sold 17,000,000
Gross profit 8,000,000
Less selling and administrative expenses 4,700,000
Income from operations 3,300,000
Other revenues and gains
Interest revenue $70,000
Gain on the sale of investments 110,000 180,000
Other ...
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