1. Starr Co. had sales revenue of $549,200 in 2014.

Other items recorded during the year were:

Cost of goods sold $325,700

Salaries and wages expense 123,500
Income tax expense 29,100
Increase in value of company reputation 16,350
Other operating expenses 10,800
Unrealized gain on value of patents 21,400

Prepare a single-step income statement for Starr for 2014. Starr has 107,500 shares of stock
outstanding. (Round earnings per share to 2 decimal places, e.g. 1.48.)

STARR CO.
Income Statement
For the Year 2014

Revenues

Sales Revenue 549200

$

Expenses

Cost of Goods Sold 325700

$

Salaries and Wages Expense 123500

Income Tax Expense 29100

Other Operating Expenses 10800

Total Expenses 489100

Net Income / (Loss) 60100

$

Earnings Per Share .56

$
2. Brisky Corporation had net sales of $2,410,800 and interest revenue of $36,900 during 2014.
Expenses for 2014 were cost of goods sold $1,463,300; administrative expenses $214,100;
selling expenses $286,900; and interest expense $53,700. Brisky’s tax rate is 30%. The
corporation had 102,000 shares of common stock authorized and 71,530 shares issued and
outstanding during 2014. Prepare a single-step income statement for the year ended
December 31, 2014. (Round earnings per share to 2 decimal places, e.g. 1.48.)

BRISKY CORPORATION
Income Statement
For the Year Ended December 31, 2014

Revenues

Net Sales 2410800

$

Interest Reven 36900

Total Revenues 2447700

Expenses

Cost of Goods 1463300

$

Administrative 214100

Selling Expens 286900

Interest Expen 53700

Income Tax Ex 128910

Total Expenses 2146910

Net Income / (Loss) 300790

$

Earnings Per Share 4.21

$
3. Brisky Corporation had net sales of $2,418,400 and interest revenue of $33,000 during 2014.
Expenses for 2014 were cost of goods sold $1,450,300; administrative expenses $213,000;
selling expenses $296,600; and interest expense $49,600. Brisky’s tax rate is 30%. The
corporation had 105,600 shares of common stock authorized and 72,570 shares issued and
outstanding during 2014. Prepare a condensed multiple-step income statement for Brisky
Corporation. (Round earnings per share to 2 decimal places, e.g. 1.48.)

BRISKY CORPORATION
Income Statement
For the Year Ended December 31, 2014

Net Sales 2418400

$

Cost of Goods 1450300

Gross Profit / (Loss) 968100

Selling Expens 296600

$

Administrative 213000

509600

Income From Operations 458500

Other Revenues and Gains

Interest Reven 33000

Other Expenses and Losses

Interest Expen 49600

16600

Income Before Income Tax 441900

Income Tax Ex 132570

Net Income / (Loss) 309330

$

Earnings Per Share 4.26

$
 4. Portman Corporation has retained earnings of $714,900 at January 1, 2014. Net income
during 2014 was $1,407,000, and cash dividends declared and paid during 2014 totaled
$81,800. Prepare a retained earnings statement for the year ended December 31, 2014. (List
items that increase retained earnings first.)

PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2014

Retained Earnings, January 1 714900

$

Add Net Income / (Loss) 1407000

:

2121900

Less Cash Dividends 81800

:

Retained Earnings, December 31 2040100

$

5. Roxanne Carter Corporation reported the following for 2014: net sales $1,244,600; cost
of goods sold $731,200; selling and administrative expenses $334,400; and an
unrealized holding gain on available-for-sale securities $22,900.

Prepare a statement of comprehensive income using one statement format. (Ignore income taxes
and earnings per share.)

ROXANNE CARTER CORPORATION

Income Statement and Comprehensive Income Statement
For the Year Ended December 31, 2014

Sales Revenue 1244600

$

Cost of Goods Sold 731200

Gross Profit / (Loss) 513400

Selling and Administrative Expenses 334400

Net Income / (Loss) 179000

 Unrealized Holding Gain, Net of Tax 22900

Comprehensive Income 201900

$

Prepare a statement of comprehensive income, using the two statement format. (Ignore income taxes
and earnings per share.)

ROXANNE CARTER CORPORATION

Income Statement and Comprehensive Income Statement
For the Year Ended December 31, 2014

Net Sales 1244600

$

Cost of Goods Sold 731200

Gross Profit / (Loss) 513400

Selling and Administrative Expenses 334400

Net Income / (Loss) 179000

$
Comprehensive Income

Net Income / (Loss) 179000

$

Unrealized Holding Gain 22900

Comprehensive Income 201900

$
 6. Maher Inc. reported income from continuing operations before taxes during 2014 of $806,600.
Additional transactions occurring in 2014 but not considered in the $806,600 are as follows.

1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of

$93,800 during the year. The tax rate on this item is 46%.
2. At the beginning of 2012, the corporation purchased a machine for $54,900 (salvage value of
$9,150) that had a useful life of 6 years. The bookkeeper used straight-line depreciation for 2012,
2013, and 2014 but failed to deduct the salvage value in computing the depreciation base.
3. Sale of securities held as a part of its portfolio resulted in a loss of $61,500 (pretax).
4. When its president died, the corporation realized $166,100 from an insurance policy. The cash
surrender value of this policy had been carried on the books as an investment in the amount of
$45,300 (the gain is nontaxable).
5. The corporation disposed of its recreational division at a loss of $123,800 before taxes. Assume
that this transaction meets the criteria for discontinued operations.
6. The corporation decided to change its method of inventory pricing from average-cost to the FIFO
method. The effect of this change on prior years is to increase 2012 income by $61,950 and
decrease 2013 income by $21,300 before taxes. The FIFO method has been used for 2014. The
tax rate on these items is 40%.

Prepare an income statement for the year 2014 starting with income from continuing operations
before taxes. Compute earnings per share as it should be shown on the face of the income statement.
Common shares outstanding for the year are 120,000 shares. (Assume a tax rate of 30% on all items,
unless indicated otherwise.) (Round earnings per share to 2 decimal places, e.g. 1.48 and all
other answers to 0 decimal places, e.g. 5,275.)

Computation of income from cont. operations before taxes:

As previously stated $806,600
Loss on sale of securities (61,500)
Gain on proceeds of life insurance policy ($166,100 – $45,300) 120,800
Error in computation of depreciation
As computed ($54,900 ÷ 6) $9,150
Corrected ($54,900 – $9,150) ÷ 6 (7,625) 1,525
As restated $867,425

Computation of income tax:

Income from continuing operations before taxes $867,425
Nontaxable income (gain on life insurance) (120,800)
Taxable income 746,625
Tax rate × 0.30
Income tax $223,988

ANSWERS IN RED ARE CORRECT!

MAHER INC.
Income Statement (Partial)
For the Year Ended December 31, 2014
$
Income From Continuing Operations Before Income Tax
867425

Income Tax Expense 223988

Income From Continuing Operations 643437

Discontinued Operations

$
Loss From Disposal of Recreational Division
123800

Less
: 37140 86660
Applicable Income Tax Reduction

Income Before Extraordinary Item 556777

Extraordinary Item
:

Major Casualty Loss 93800

Less
: 43148 50652
Applicable Income Tax Reduction

$
Net Income / (Loss)
506125

Earnings Per Share

:
$
Income From Continuing Operations
5.36

Discontinued Operations .72

Income Before Extraordinary Item 4.64

Extraordinary Item, Net of Tax .42

$
Net Income / (Loss)
4.22