Question

Prepare a Condensed Income Statement

View Policies Current Attempt in Progress The following are selected ledger accounts of Blue Corporation at December 31, 2020. Cash Inventory Sales revenue Unearned sales revenue Purchases Sales discounts Purchase discounts Selling expenses Accounting and legal services Insurance expense (office) Advertising expense Delivery expense Depreciation expense (office equipment) Depreciation expense (sales equipment) $244,200 706,200 5,643,000 154,440 3,677,520 44,880 35,640 91,080 43,560 31,680 71,280 122,760 63,360 47,520 Salaries and wages expense (sales) Salaries and wages expense (office) Purchase returns Sales returils and allowances Freight-in Accounts receivable Sales commissions Telephone and Internet expense (sales) Utilities expense (office) Miscellaneous office expenses Rent revenue Casualty loss (before tax) Interest expense Common stock ($10 par) $374,880 456,720 19,800 104,280 95,040 188,100 109,560 22,440 42,240 10,560 316,800 92,400 232,320 521,920 Blue's effective tax rate on all items is 20%. A physical inventory indicates that the ending inventory is $686,000. Prepare a condensed 2020 income statement for Blue Corporation. (Round earnings per share to 2 decimal places, e.g. 1.48. BLUE CORPORATION

Answer 1

BLUE CORPORATION
Income Statement
For the Year Ended December 31, 2020
Net Sales                                [Refer working note 1]		$5,493,840
Cost of Goods Sold                 [Refer working note 2]		$3,737,320
Gross Profit / (Loss)               [$5,493,840 - $3,737,320]		$1,756,520
Selling Expenses                     [Refer working note 3]	$839,520
Administrative Expenses        [Refer working note 4]	$648,120
		$1,487,640
Income From Operations                   [$1,756,520 - $1,487,640]		$268,880
Rent Revenue	$316,800
Interest Expense	($232,320)
Casualty loss	($92,400)
[$316,800 - $232,320 - $92,400]		($7,920)
Income Before Income Tax                  [$268,880 - $7,920]		$260,960
Income Tax Expense                              [$260,960 x 20%]		$52,192
Net Income / (Loss)                             [$260,960 - $52,192]		$208,768
Earnings Per Share   [Net income / Common shares outstanding = $208,768 / 52,192 shares]		$4.00
Note: Common shares outstanding = Common stock value / Par value per share = $521,920 / $10 = 52,192 shares

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Working note 1 - Calculation of Net Sales
Sales revenue	$5,643,000
Less: Sales discounts	$44,880
Less: Sales returns and Allowances	$104,280
Net Sales	$5,493,840

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Working note 2 - Calculation of cost of goods sold
Beginning inventory                            (a)		$706,200
Purchases	$3,677,520
Less: Purchase discounts	$35,640
Less: Purchase returns	$19,800
Net purchases                                   (b)		$3,622,080
Add: Frieght-in                                  (c)		$95,040
Cost of inventory available for sale   (a + b + c)		$4,423,320
Less: Ending inventory		$686,000
Cost of goods sold		$3,737,320

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Working note 3 - Calculation of total selling expenses
Selling expenses                                            (a)	$91,080
Advertising expense                                     (b)	$71,280
Delivery expense                                          (c)	$122,760
Depreciation expense (sales equipment)   (d)	$47,520
Salaries and wages expense (sales)             (e)	$374,880
Sales commissions                                       (f)	$109,560
Telephone and Internet expense (sales)       (g)	$22,440
Selling expenses           [a + b + c + d + e + f + g]	$839,520

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Working note 4 - Calculation of administrative expenses
Accounting and legal services                          (a)	$43,560
Insurance expense (office)                                (b)	$31,680
Depreciation expense (office equipment)          (c)	$63,360
Salaries and wages expense (office)                (d)	$456,720
Utilities expense (office)                                   (e)	$42,240
Miscellaneous office expenses                          (f)	$10,560
Administrative expenses           [a + b + c + d + e + f ]	$648,120