The financial records of Skysong Inc. were destroyed by fire at the end of 2017.

Question

The financial records of Skysong Inc. were destroyed by fire at the end of 2017. Fortunately, the controller had kept certain statistical data related to the income statement as follows. 1. The beginning merchandise inventory was $96,900 and decreased 20% during the current year. 2. Sales discounts amount to $17,900. 3. 30,590 shares of common stock were outstanding for the entire year. 4. Interest expense was $21,600. 5. The income tax rate is 30%. 6. Cost of goods sold amounts to $506,600. 7. Administrative expenses are 20% of cost of goods sold but only 8% of gross sales. 8. Four-fifths of the operating expenses relate to sales activities. From the foregoing information prepare an income statement for the year 2017 in single-step form. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Explanation / Answer

Revenue 1,266,500( since admin expenses are 8% of gross sales admin expenses are 506,600*.20=101320 so sales are 101320/.08)

Add closing stock 77,520( since the closing stock is 20% less than the closing stock)

Less Opening stock 96,900

Less Purchase 487,220(COGS =506,600 so the purchase =cogs-oening stock +closing stock)

Gross Margin 759,900

Less Discount 17,900

Less Interest Expense : 21,600

Less Admin Expense : 1,01,320

Net Profit Before Tax : 619,080

Les tax @.30 185,724

Net Profit after Tax : 433,356

No of share 30590

Earning per share 14.16(433,356/30590)

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