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Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2014.

Cash $50,000
Administrative expenses $100,000
Selling expenses $80,000
Net sales $540,000
Cost of goods sold $210,000
Cash dividends declared (2014) $20,000
Cash dividends paid (2014) $15,000
Discontinued operations (loss before income taxes) $40,000
Depreciation expense, not recorded in 2013 $30,000
Retained earnings, December 31, 2013 $90,000
Effective tax rate 30%
Required:
a. Compute net income for 2014.
b. Prepare a partial income statement beginning with income from continuing operations before income tax and including appropriate earnings per share

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Parrain

Answer:

Income from continuing operations:

= Net sales - COGS - Selling expense - Admin expenses

= 540,000 - 210,000 - 80,000 - 100,000

= $150,000

Discontinued operations net of tax:

= 40,000 * ( 1 - 30%)

= $28,000

                         Net income and Partial income statement

Income from continuing operations before tax                   $150,000

Income tax expense (150,000 * 30%)                                   ($45,000)

Income from continuing operations                                      $105,000

Discontinued operations net of taxes loss                           ($28,000)

Net income                                                                             $77,000

Earnings per share  

Income from continuing operations(105,000/10,000)        $10.50

Discontinued operations(28,000 / 10,000)                         $2.80

Net income (77,000 / 10,000)                                               $7.70

Earnings per share calculated assuming 10,000 shares.

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