Presented below are selected ledger accounts of McGraw Corporation as of Decembe

Question

Presented below are selected ledger accounts of McGraw Corporation as of December 31, 2010.

Cash $50,000
Administrative expenses 100,000
Selling expenses 80,000
Net sales 540,000
Cost of goods sold 260,000
Cash dividends declared (2010) 20,000
Cash dividends paid (2010) 15,000
Discontinued operations (loss before income taxes) 40,000
Depreciation expense, not recorded in 2009 30,000
Retained earnings, December 31, 2009 90,000
Effective tax rate 30%


(a) Compute net income for 2010. (List multiple entries from largest to smallest amount, e.g. 10, 5, 2. Enter all amounts as positive amounts and subtract where necessary.)

b) Prepare a partial income statement beginning with income from continuing operations before income tax, and including appropriate earnings per share information. Assume 20,000 shares of common stock were outstanding during 2010. (Round earnings per share to 2 decimal places, e.g. 5.25 and all other answers to zero decimal places, e.g. 2,250. For earnings per share use either a negative sign preceding the number, e.g. 0.45 or parenthesis, e.g. (0.45) for negative numbers. Enter all other amounts as positive amounts and subtract where necessary.)

Explanation / Answer

Net sales 540,000 Cost of goods sold 260,000 Gross Margin 280,000 Administrative expenses 100,000 Selling expenses 80,000 180,000 Income from operations 100,000 Less: Income tax 30,000 Income from continuing operations 70,000 ======= Income from continuing operations 70,000 Discontinued operations (net of income taxes) 28,000 Extra ordinary item Depreciation expense, not recorded in 2009 (21,000) (net of Income tax) ------------------- Net Income for the year $ 77,000 ======== Earnings per share $3.85

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