P 11 -56B (L earn i ng Obj ec tiv es 1 , 4: P re p are a co mp le x i nco m e s t a t e m en t , i n

P11-56B (Learning Objectives 1, 4: Prepare a complex income statement, including earnings per share; evaluate quality of earnings) The following information was taken from the records of Shaw Cosmetics, Inc., at December 31, 2012:

 

 

 

 

 

Prior-period adjustment—

 

Dividends on common stock …………..

$26,000

debit to Retained Earnings………….

$    9,000

Interest expense…………………………….

25,000

Income tax expense (saving):

 

Gain on lawsuit settlement ……………..

10,000

Continuing  operations ……………….

25,950

Dividend  revenue ………………………….

16,000

Income from discontinued

 

Treasury stock, common

 

operations………………………………..

8,000

(5,000 shares at cost) …………….

15,000

Extraordinary loss …………………….

(13,500)

General  expenses…………………………..

81,000

Loss on sale of plant assets………………….

15,000

Sales   revenue ………………………………..

570,000

Income from discontinued

 

Retained earnings, beginning,

 

operations………………………………..

20,000

as originally reported …………….

197,000

Preferred stock, 6%, $30 par,

 

Selling  expenses…………………………….

93,000

1,000 shares issued ……………………

30,000

Common stock, no par,

 

Extraordinary  loss……………………………..

34,000

30,000 shares authorized

 

Cost  of  goods sold……………………………..

316,000

and   issued ……………………………

390,000

 

 

 

 

  ▶ Requirements

1. Prepare Shaw Cosmetics’ single-step income statement, which lists all revenues together and all expenses together, for the fiscal year ended December 31, 2012. Include earnings-per-share data.

2.    Evaluate income for the year ended December 31, 2012. Shaw’s top managers hoped to earn income from continuing operations equal to 11% of sales.

 

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