Question

The financial records of Sheffield Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows. 1. The beginning merchandise inventory was $99,360 and decreased 20% during the current year. 2. Sales discounts amount to $18,700. 3. 19,090 shares of common stock were outstanding for the entire year. 4. Interest expense was $20,400. 5. The income tax rate is 30%. 6. Cost of goods sold amounts to $460,000. 7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. 8. Four-fifths of the operating expenses relate to sales activities. From the foregoing information prepare an income statement for the year 2020 in single-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.)

The financial records of Sheffield Inc. were destroyed by fire at the end of 2020. Fortunately, the controller had kept certain statistical data related to the income statement as follows. 1. 2. 3. 4. The beginning merchandise inventory was $99,360 and decreased 20% during the current year. Sales discounts amount to $18,700. 19,090 shares of common stock were outstanding for the entire year. Interest expense was $20,400. The income tax rate is 30%. Cost of goods sold amounts to $460,000. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. Four-fifths of the operating expenses relate to sales activities. 5. 6. 7. 8. From the foregoing information prepare an income statement for the year 2020 in single-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.) SHEFFIELD INC. Income Statement $ $ $ $

Answer 1

SHEFFIELD INC.
Income Statement
For the Year Ended December 31, 2020
Revenues
Net sales		1131300
Expenses
Cost of goods sold	460000
Selling expenses	368000
Administrative expenses	92000
Interest expense	20400
Total expenses		940400
Income before income tax		190900
Income tax expense		57270
Net income/(loss)		133630
Earnings per share		7.00

Workings:

1	Administrative expenses = 20% x Cost of goods sold = 20% x $460000 = $92000
2	Administrative expenses = 8% x Gross Sales
	Gross sales = Administrative expenses/8% = $92000/8% = $1150000
	Net sales = Gross sales - Sales discounts = $1150000 - $18700 = $1131300
3	Operating expenses = Selling expenses + Administrative expenses
	Selling expenses = 4/5 x Operating expenses
	Administrative expenses = 1/5 x Operating expenses
	Operating expenses = 5 x $92000 = $460000
	Selling expenses = $460000 - $92000 = $368000
4	Income tax expense = 30% x $190900 = $57270
5	Earnings per share = Net income/Number of shares of Common stock outstanding = $133630/19090 = $7.00