Problem:
The following items are from Taperline Corporation on December 31, 2010. Assume a flat 40% corporate tax rate on all items, including the casualty loss.
- Sales .................................................... $670,000
- Rental income ......................................... 3,600
- Gain on the sale of fixed assets ..................... 3,000
- General and administrative expenses ............... 110,000
- Selling expenses ....................................... 97,000
- Interest expense ........................................ 1,900
- Depreciation for the period ........................... 10,000
- Extraordinary item (casualty loss-pretax) ......... 30,000
- Cost of sales ............................................. 300,000
- Common stock (30,000 shares outstanding) ......... 150,000
Task:
Question 1: Prepare a single-step income statement for the year ended December 31, 2010. Include earnings per share for earnings before extraordinary items and net income.
Question 2: Prepare a multiple-step income statement. Include earnings per share for earnings before extraordinary items and net income.
Note: Provide support for your rationale.