[Talyomaly]

The questions says The following info was taken from the records of Mobile Motorsports, Inc. at September 30, 2008.

~General expenses $133,000
~Preffered Stock, $2, no-par, 5,000 shares issued 200,000
~Common stock, $10 par, 25,000 shares authorized and issued 250,000
~Net sales revenue 837,000
~ Treasury stock, common (1,000 shares) 11,000
~Cost of goods sold $435,000
~Retained earnings, beginning 88,000
~Selling expenses 121,000
~Income from discontinued operations 8,000
~Income tax expenses:
* Continuing operations 72,000
*Income from discontinued operations 2,000

~Prepare a multi-step income statement for Mobile Motorsports, Ins. for the fiscal yar eded September 30,2008. Include earnings per share.

This is what I've come up with so far knowing that net income is suppose to equal $82,00 and EPS net income is to equal $3.00. But this is as far as I could get. Thanks for any help!

[morgaine300]

First, look here:
Principles of Accounting Chapter 15
A little ways down there is an example of a corporate statement, and the first one has just discontinued operations like yours does. So that'll give you a good idea how to set the income statement up.

Except when I do below line items, I usually net the tax out and list it something like this:
Income from Discontinued Operations (net of $2000 tax)... 6000
The example lists tax on a separate line and shows the subtraction. I never do that and I never see that. Nothing wrong with it, but you might want to check your text and see if there's an example and how it's done. (Especially if your instructor is picky about such things! ;) )

Your EPS is incorrect. For one thing, you've used the tax on the discontinued operations, instead of the net income from it. For two, it's income, not a loss. For three, the income before extraordinary items is not 74,000 -- not quite sure how you got that. You either have the wrong income, or the wrong dividends for preferred stock. It would help to see how you came up with that. And for four, there aren't 24,000 shares of common stock.

[morgaine300]

P.S. It's not "income before extraordinary item." It's "income from continuing operations." There isn't any extraordinary item. Go by whatever the next item is.

Income from continuing operations -- when discontinued operations is next.
Income before Extraordinary Items -- when an extraordinary item is next.
Income before Cumulative Affect of Change in Accounting Principle -- when a cumulative affect is next

Bottom line one is always Net Income regardless of what you do or don't have.