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  • Oct 9, 2006, 12:51 PM
    tsmith86
    Multiple-step income statement
    Can someone help me with the following problem.

    The following items were taken from the records of Moonlight Video Inc. for the calendar year 2007:
    Prior period error $ 40,000
    Cash dividends declared 80,000
    Cost of sales 300,000
    Selling and administrative expenses 350,000
    Sales 1,000,000
    Interest income 15,000
    Interest expense (25,000)
    Beginning retained earnings 800,000
    Extraordinary gain 50,000
    Gain from the sale of the VCR segment 200,000
    Operating loss from the VCR segment $(80,000)
    Ending number of shares of common stock 90,000
    Weighted-average number of common shares outstanding 100,000
    Tax rate - 30%

    1.) Using the information above, prepare a multiple-step income statement for 2007 including EPS disclosure.
    (I got stuck on this part but this is what I have so far.)
    Moonlight
    Income Statement
    For the Year Ended December 31, 2007

    Revenues:
    Sales
    1,000,000
    Cost of sales
    300,000
    Gross profit
    700,000
    Operating Expenses
    Selling and administractive expenses
    350,000
    Operating income
    350,000
    Loss from the VCR segment
    (80,000)
    Gain from the sale of VCR segment
    200,000
    Interest Income
    15,000
    Interest Expense
    (25,000)
    Income before Income taxes
    460,000
    Income tax expense
    138000
    Net Income
    322,000

    I am not sure if I did this correctly because I wasn't sure where I would put the prior period error, the extraordinary gain and if I put the loss and gain from the sale of the VCR segment in the right spot.
    I cannot do the EPS disclosure or the statement of retained earnings until I find the net income.
    Any help would greatly be appreciated.

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