Format of an Income Statement and a Statement of Retained Earnings The following
ID: 2567086 • Letter: F
Question
Format of an Income Statement and a Statement of Retained Earnings The following data relate to the operations of Slick Software, Inc., during 2015 Continuing operations: . . . . . . . . . ...16,900,000 Costs and expenses (including applicable income tax) Operating income during 2015 on segment of the business Loss on disposal of discontinued segment (net of income Other data 140,000 ax benefit) Extraordinary loss (net of income tax benefit) . . .. . . . . . . . . . . . . . . . Prior period adjustment (increase in 2014 depreciation 550,000 900,000 . . 350,000 950,000 Cash dividends declared Instructions a. Prepare a condensed income statement for 2015, including earnings per share figures. Slick Software, Inc., had 200,000 shares of $1 par value common stock and 80,000 shares of $6.25, $100 par value preferred stock outstanding throughout the year b. Prepare a statement of retained earnings for the year ended December 31, 2015. As originally reported, retained earnings at December 31, 2014, amounted to $7,285,000 c. Compute the amount of cash dividend per share of common stock declared by the board of directors for 2015. Assume no dividends in arrears on the preferred stock. d. Assume that 2016 earnings per share is a single figure and amounts to $8.00. Assume also that there are no changes in outstanding common or preferred stock in 2016. Do you consider the $8.00 earnings per share figure in 2016 to be a favorable or unfavorable statistic in comparison with 2015 performance? ExplainExplanation / Answer
a)
SLICK SOFTWARE INC.
CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DEC 31,2015
NET SALES $ 19,850,000
Costs and expenses (including applicable income taxes) 16,900,000
Income from continuing operations $ 2,950,000
Discontinued operations
Operating Income (net of Income taxes) $140000
Loss on disposal (net of Income tax benefit) (550,000) (410,000)
Income before extraordinary item $2,540,000
Extraordinary loss(net of income tax benefit) (900,000)
Net Income $1,640,000
Earnings per share
Earning from continuing operations $ 12.25
Loss from discontinued operations (2.05)
Earnings before extraordinary items $10.20
Extra ordinary loss (4.50)
Net Earnings (net of preferred dividends) $ 5.70
Preferred Dividends 80000 shares x $6.25=$ 500,000
B) SLICK SOFTWARE INC
Statement of Retained Earnings
For the Year Ended December 31,2015
Retained Earnings December 31,2015 $7,285,000
As originally Reported
Less Prior Period Adjustment 350,000 As restated $693,5000
Net Income 1,640,000
Subtotal $8,575,000
Cash Dividends (950,000)
Retained Earnings Dec 31,2015 $7,625,000
C) Total cash Dividends Declared during 2015 $ 950,000
Less Preferred Stock Dividend 500,000
$ 450,000
Number of common shares outstanding through 2015 200000
Cash Dividend Per Common Share $ 2.25
D) In case 2016 Earnings per share figure is assumed at $8.00. This would definitely be a favourable position as compared to 2015 performance as net EPS figure for 2015 was at $5.70
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