Question Details

ACCT 550
HOMEWORK WEEK 2
E4-4 (Multiple-Step and Single-Step) Two accountants for the firm of Allen and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following 2012 information related to Webster Company ($000 omitted).
Administrative expense
	Officers’ salaries					$4,900
	Depreciation of office furniture and equipment	3,960
Cost of goods sold						63,570
Rent revenue							17,230
Selling expense	
	Transportation-out					2,690
	Sales commissions					7,980
	Depreciation of sales equipment			6,480
Sales revenue							96,500
Income tax expense						7,580
Interest expense						1,860
Instructions
(a) Prepare an income statement for the year 2012 using the multiple-step form. Common shares outstanding for 2012 total 40,550 (000 omitted).
(b) Prepare an income statement for the year 2012 using the single-step form.
(c) Which one do you prefer? Discuss.

E4-12 (Earnings per Share) At December 31, 2011, Schroeder Corporation had the following stock outstanding.	

8% cumulative preferred stock, $100 par, 107,500 shares	$10,750,000 
Common stock, $5 par, 4,000,000 shares			$20,000,000

During 2012, Schroeder did not issue any additional common stock. The following also occurred during 2012.

Income from continuing operations before taxes		$21,650,000
Discontinued operations (loss before taxes)			3,225,000
Preferred dividends declared					860,000
Common dividends declared					2,200,000
Effective tax rate						35%

Instructions
Compute earnings per share data as it should appear in the 2012 income statement of Schroeder Corporation. (Round to two decimal places.)
P4-1 (Multiple-Step Income, Retained Earnings) Presented below is information related to Dickinson Company for 2012.
Retained earnings balance, January 1, 2012			$980,000
Sales revenue							25,000,000
Cost of goods sold						16,000,000
Interest revenue						70,000
Selling and administrative expenses				4,700,000
Write-off of goodwill						820,000
Income taxes for 2012						1,244,000
Gain on the sale of investments (normal recurring)		110,000
Loss due to flood damage-extraordinary item (net of tax)	390,000
Loss on the disposition of the wholesale division (net of tax)440,000
Loss on operations of the wholesale division (net of tax)	90,000
Dividends declared on common stock			250,000
Dividends declared on preferred stock			80,000
Instructions
Prepare a multiple-step income statement and a retained earnings statement. Dickinson Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Dickinson sold the wholesale operations to Rogers Company. During 2012, there were 500,000 shares of common stock outstanding all year.