Question

2. (6 points) The following information is related to Dickinson Company for 2014. Retained earnings balance, January 1, 2014 $800,000 18,630,50 Sales Revenue 10,125,12 Cost of goods sold Interest expense Selling expenses Administrative expenses Loss on write-down of inventory Interest revenue Income taxes for 2014 Gain on the sale of investments (normal recurring) Loss on operations of the wholesale division (net of tax) Loss on the disposition of the wholesale division (net of tax) Dividends declared on preferred stock Dividends declared on common stock 181,300 2,057,000 2,333,500 850,000 214,000 825,000 183,130 114,200 531,200 94,800 255,600 Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2014, there were 250,000 shares of common stock outstanding all year. Required: Prepare a multiple-step income statement in good form. Do not calculate earnings per share information.

Answer 1

Solution:

Multiple-Step Income Statement: Dickinson Company

DICKINSON COMPANY
Income statement
For the Year Ended December 31,2014
Sales Revenue		$      18,630,500
(less):Cost of goods sold		$    (10,125,125)
Gross Profit		$         8,505,375
Operating expenses:
Selling and Administrative Expenses
Selling Expenses	$       2,057,000
Administrative Expenses	$       2,333,500	$ (4,390,500)
Income from Operations		$         4,114,875
Other Revenues and Gains:
Interest Revenue	$           214,000
Gain on Sale of Investment	$           183,130	$            397,130
Other Expenses and losses:
Interest expense	$           181,300
Losses on Write off of Inventory	$           850,000	$      (1,031,300)
Income before Continuing operations before Income Tax		$         3,480,705
Income Tax		$          (825,000)
Income from Continuing Operations		$         2,655,705
Discontinued Operations:
Loss on Operations, Net of Tax	$           114,200
Loss on Disposal, Net of Tax	$           531,200	$          (645,400)
Net Income		$         2,010,305

Notes:

1) Dividend declared to preferred and common stock holders will not considered in income statement.