Question

The following information was taken from the records of Whispering Inc. for the year 2020: Income tax applicable to income from continuing operations $243,100; income tax applicable to loss on discontinued operations $33,150, and unrealized holding gain on available-for-sale securities (net of tax) $19,500.

Gain on sale of equipment $ 123,500
Cash dividends declared $195,000
Loss on discontinued operations 97,500
Retained earnings January 1, 2020 3,480,000
Administrative expenses 312,000
Cost of goods sold 1,105,000
Rent revenue 52,000
Selling expenses 390,000
Loss on write-down of inventory 78,000
Sales Revenue 2,470,000
Shares outstanding during 2020 were 100,000.
Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a comprehensive income statement for 2017, using the two statement format.

Answer 1

a) Whispering, Inc.

Income statement

For the year ended December 31, 2020

Sales Revenue $2,470,000

Cost of goods sold ($1,105,000)

Loss on write-down of inventory ($78,000 )

Gross profit $1,287,000

Operating expenses:

• Administrative expenses $312,000
• Selling expenses $390,000 ($702,000)

Operating income $585,000

Other income/expenses:

Rent revenue $52,000

Gain on sale of equipment $123,500

Income before taxes $760,500

Income taxes ($243,100)

Net income from continuing operations $517,400

Discontinued operations:

• Loss on discontinued operations ($97,500)
• Income tax applicable to loss $33,150 ($64,350)

Net income $453,050

Other comprehensive income:

Unrealized holding gain on AFS securities (net) $19,500

Comprehensive income $472,550

Shares outstanding during 2020 were 100,000

Earnings per share $4.7255

Cash dividends declared $195,000

Dividends per share $1.95

b) Whispering, Inc.

Comprehensive Income Statement

For the year ended December 31, 2020

Net income $453,050

Other comprehensive income:

Unrealized holding gain on AFS securities (net) $19,500

Comprehensive income $472,550