Malone Corporation's Capital Structure
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27. Malone Corporation's capital structure consists of 20,000 shares of common stock. At December 31, 1998 an analysis of the accounts and discussions with company officials revealed the following information:
Sales $1,100,000
Purchase discounts 18,000
Purchases 642,000
Earthquake loss (net of tax) (extraordinary item) 42,000
Selling expenses 128,000
Cash 60,000
Accounts receivable 90,000
Common stock 200,000
Accumulated depreciation 180,000
Dividend revenue 8,000
Inventory, January 1, 1998 152,000
Inventory, December 31, 1998 125,000
Unearned service revenue 4,400
Accrued interest payable 1,000
Land 370,000
Patents 100,000
Retained earnings, January 1, 1998 290,000
Interest expense 17,000
Cumulative effect of change from straight-line to
accelerated depreciation (net of tax) 28,000
General and administrative expenses 150,000
Dividends declared 29,000
Allowance for doubtful accounts 5,000
Notes payable (maturity 7/1/01) 200,000
Machinery and equipment 450,000
Materials and supplies 40,000
Accounts payable 60,000
The amount of income taxes applicable to ordinary income was $48,600, excluding the tax effect of the earthquake loss which amounted to $18,000 and the tax effect of the change of accounting principle which was $12,000.
INSTRUCTIONS
(a) Prepare a multiple step income statement.
(b) Prepare a retained earnings statement.
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Solution Summary
The solution examines Malone Corporation's capital structure. The solution analyzes the accounts and discussion based on this information provided.
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Multi-step Income Statement
Sales $1,100,000
Cost of goods sold
Inventory Jan 1, 1998 $152,000
Add: Purchases less purchase discounts $624,000
Les: Inventory Dec 31, 1998 $(125,000) $651,000
Gross Profit $449,000
Operating expenses:
General and administrative expenses $150,000
Selling expenses ...
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