Question

Presented below are selected balances for Tucker as of December 31, 2018:

Cash $50,000
Administrative expenses 90,000
Selling expenses 80,000
Accumulated other comprehensive income, beginning 55,000
Net sales 540,000
Cost of goods sold 210,000
Common stock, beginning 75,000
Cash dividends declared 20,000
Unrealized loss on available-for-sale debt securities 7,000
Interest expense 10,000
Cash dividends paid 15,000
Operating income from discontinued operations (before taxes) 30,000
Retained earnings, beginning 90,000
Loss on disposal of discontinued operations (before taxes) 45,000
Effective tax rate 30%

Required:
a. Compute net income for 2020.
b. Prepare an income statement for 2018 assuming 10,000 shares of common stock were outstanding all year.

Answer 1

Tucker`s

Income Statement for the year end December 31, 2018

Net sales 540,000

Cost of goods sold (210,000)

Gross Profit 330,000

Administrative expenses 90,000

Selling expenses 80,000

Unrealized loss on available-for-sale debt securities 7,000

Interest expense 10,000 (187,000)

Net Income before tax from continuing activities 143,000

Income tax expense at 30% (43,900)

Net Income after tax from continuing activities 99,100

Step-by-step explanation:

Prepare the Income statement for calculation of net income. Income statement consist of Revenues/ Income and Expenses.