Lawson Company’s accounting system listed the followinginformation for the compa
ID: 2446421 • Letter: L
Question
Lawson Company’s accounting system listed the followinginformation for the company’s 2007 fiscal year (inmillions):
Average common sharesoutstanding 2.5
Cost of goodssold $ 173.2 Extraordinarygain 19.4
Gain on sale ofsecurities 7.4General and administrativeexpenses 73.3 Income taxes (35% of pretax income)
Interestexpense 10.0
Interestincome 5.7
Loss associated with cumulative effect of accountingchange 4.0
Loss fromdiscontinuedoperations 12.3
Sales ofmerchandise 318.6
Selling expenses 28.5
Prepare an income statement for Lawson Company for the yearended December 31, 2007. Assume that the tax rate of 35% applies tospecial items as well as ordinary income. (Hint: Discontinuedoperations are listed before extraordinary items, which are listedbefore accounting changes.)
Explanation / Answer
Income Statement Sale of Merchandise 318.60 Less: Cost of Goods Sold 173.20 Gross Profit 145.40 Less: General & Administrative Expenses 73.30 Selling Expenses 28.50 Operating Income 43.60 Add: Other Income Interest Income 5.70 Gain on Sale of Securities 7.40 56.70 Less: Interest Expense 10.00 Income from Continuing Operations 46.70 Less : Loss from Discontinued 12.30 Operations 34.40 Income before Extraordinary Gain 42.70 Income before Cumulative effect 77.10 of Accounting Change Loss associated with Cumulative effect 4.00 of Accounting change Net Income before Taxes 73.10 Less : Taxes 25.59 Net Income after Taxes 47.52
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