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    Earnings per share, EPS, and multi-step income statement

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    1. At December 31, 2009, the general ledger of Main Street Marketing had the following account balances. All adjusting entries (except for income taxes at 40%) have been made. The company had 9,000 shares of common stock outstanding during the year.

    Accounts payable $7,340
    Accounts receivable 12,980
    Accrued liabilities 22,500
    Accumulated depreciation 14,980
    Advertising expense 8,777
    Cash 7,980
    Common Stock 28,000
    Cost of goods sold 118,922
    Depreciation expense 11,254
    Equipment 78,700
    Loss on sale of land 7,900
    Interest expense 1,980
    Merchandise 22,990
    Land 50,000
    Retained earnings 37,091
    Sales revenue 311,200
    Utilities expense 6,350
    Wages expense 71,245

    a. What is the amount of gross profit? Show your computations to earn credit.
    b. What is the amount of operating income? Show your computations to earn credit.
    c. What is the amount of pretax income? Show your computations to earn credit.
    d. What is the amount of net income? Show your computations to earn credit.
    e. What are the earnings per share? Show your computations to earn credit.

    2. Arizona Company reported accounts receivable of $21,200,000 at the end of its 2009 fiscal year. This amount was net of an allowance for doubtful accounts of $1,456,000. During 2010, Georgia sold $72,300,400 of merchandise on credit. It collected $48,520,555 from customers. Accounts valued at $2,125,000 were written off as uncollectible during 2010. Arizona's management estimates that 8% of the year-end accounts receivable balance will be uncollectible.

    a. What amount will Arizona report for accounts receivable? Show your computations to earn credit.
    b. What is the balance for the allowance for doubtful accounts at the end of 2010? (round to whole numbers) Show your computations to earn credit.
    c. What is the doubtful accounts expense for 2010? Show your computations to earn credit.

    3. The following information regarding inventory transactions is available for the month of July:
    Date Type of Event #Units Unit Cost Total Cost
    July 1 Beginning inventory 180 $8 $1,440
    July 5 Purchase 75 $9 $ 675
    July 9 Sale 80
    July 12 Sale 45
    July 17 Purchase 140 $10 $1,400
    July 26 Sale 75
    July 29 Purchase 40 $11 $ 440

    a. What is the cost of goods sold under FIFO? Show your computations to earn credit.
    b. What is the ending inventory under FIFO? Show your computations to earn credit.
    c. What is the cost of goods sold under LIFO? Show your computations to earn credit.
    d. What is the ending inventory under LIFO? Show your computations to earn credit.
    e. What is the cost of goods sold under the weighted average method? Show your computations to earn credit.
    f. What is the ending inventory under the weighted average method? Show your computations to earn credit.

    4. The Frame It Company reporting the following items on its income statement in 2009:

    A. Net operating revenues, $814,250
    B. Cost of goods sold, $305,908
    C. Selling and administrative expenses $198,450
    D. Research and development expenses, $99,993
    E. Net interest expense, $7,887
    F. Provision for income taxes, $78,909
    G. Current year loss from discontinued operations of $18,000, net of tax benefit of $6,858
    H. Loss from sale of discontinued operations of $52,000, net of tax benefit of $11,525
    I. Preferred stock dividends, $24,000

    The company had 40,000 shares of common stock outstanding throughout the fiscal year. Compute each of the following: (Show your computations to earn credit in each.)

    a. Operating income
    b. Income (loss) from continuing operations, before taxes
    c. Income (loss) before discontinued operations
    d. Net income (loss)
    e. Net income (loss) available for common shareholders
    f. Earnings per share from continuing operations
    g. Earnings per share from discontinued operations
    h. Earnings per share from net income (loss)

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    https://brainmass.com/business/marketing/earnings-per-share-eps-multi-step-income-statement-472314

    Solution Summary

    Your tutorial is in excel, attached, on two different tabs. The full multi-step income statement with the parts labelled, including the three part earnings per share format, is shown for you. Click in cells to see computations.

    $2.19

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