Problem 4-1 The following information is related to Riverbed Company for 2017 Re

Question

Problem 4-1 The following information is related to Riverbed Company for 2017 Retained earnings balance, January 1, 2017 Sales Revenue Cost of goods sold Interest revenue Selling and administrative expenses Write-off of goodwill Income taxes for 2017 Gain on the sale of investments Loss due to flood damage Loss on the disposition of the wholesale division (net of tax) Loss on operations of the wholesale division (net of tax) Dividends declared on common stock Dividends declared on preferred stock $993,060 26,128,000 16,114,600 78,400 4,734,000 836,100 1,405,600 113,800 391,300 446,600 82,530 248,200 73,020 Riverbed Company decided to discontinue its entire wholesale operations (considered a discontinued operation) and to retain its manufacturing operations. On September 15, Riverbed sold the wholesale operations to Rogers Company. During 2017, there were 502,700 shares of common stock outstanding all year.

Explanation / Answer

Discontinued operation:

B.

Retained earnings statement:

Sales revenue $26,128,000 Cost of good sold $16,114,600 Gross profit $10,013,400 Selling and administrative expense $4,734,000 Income from operation $5,279,400 Other revenue and gains: Interest revenue $78,400 Gain on sale of investment $113,800 $192,200 Other expenses and losses: Write off goodwill $836,100 Income from continuing operation before income tax $4,251,100 Income tax $1,405,600 Income from continuing operation $2,845,500 Discontinued operation: Loss on operation, net of tax $82,530 Loss on disposal, net of tax $446,600 $529,130 Income before extraordinary item $2,316,370 Extraordinary item-loss from flood damage-net of tax $391,300 Net income $1,925,070 Earnings per share: Income from continuing operation{(2845500-73020)/502,700} $5.52

Discontinued operation:

Loss on operation, net of tax(82530/502,700) (.16) Loss on disposal, net of tax(446600/502700) (.89) (1.05) Income before extraordinary item{(2316370-73020)/502700} 4.46 Extraordinary loss, net of tax(391300/502700) (.78) Net income{(1925070-73020)/502,700} 3.68

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