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11. (5 points) Information (in dollars) related to L Service Company for 2016 follows.
Sales revenues 12,350,000
Cost of services provided 5,000,000
Selling, general, and administrative expenses 2,670,000
Investment income 187,000
Gain on the disposalof the tax preparation division* 825,000
Operating income of the tax preparation division up until its disposal* 922,000
Interest expense 147,000
Miscellaneous expenses 84,000
*The tax preparation division was considered a component.
Prepare an income statement in good form for the year 2016. Assume a 32% tax rate and that 140,000 shares of common stock were outstanding during all of 2016.
Expert Answer
| L SERVICE COMPANY | ||
| Income Statement | ||
| For Year Ended December 31, 2016 | ||
| Revenues & Gains: | ||
| Sales(net) | $ 12,350,000 | |
| Investment Income | $ 187,000 | |
| $ 12,537,000 | ||
| Expenses & Lossess: | ||
| Cost of services provided | $ 5,000,000 | |
| Selling, general, and administrative expenses | $ 2,670,000 | |
| Interest Expense | $ 147,000 | |
| Miscellaneous Expense | $ 84,000 | |
| $ 7,901,000 | ||
| Income from continuing operations before tax | $ 4,636,000 | |
| Less: Tax at 32% | $ 1,483,520 | |
| Income from continuing operations | $ 3,152,480 | |
| Gain on the disposal of the tax preparation division(net of tax) | $ 561,000 | |
| Operating income of the tax preparation division up until its disposal(net of tax) | $ 626,960 | |
| Income from discontinuing operations | $ 1,187,960 | |
| Net Income | $ 4,340,440 | |
| Earning per share | ||
| Income from continuing operations | 22.52 | |
| Income from discontinuing operations | 8.49 | |
| Net Income | 31.00 | |
