he following information was taken from the records of Clarkston Motorsports, In

Question

he following information was taken from the records of Clarkston Motorsports, Inc. at November 30, 2016.

Prepare a multi-step income statement for Clarkston Motorsports for the fiscal year ended November 30, 2016.

Include earnings per share.

Selling Expenses Administrative Expenses ncome From Discontinued Operations Cost of Goods Sold Treasury Stock-Common (2,000 shares) Net Sales Revenue $ 145,000 Common Stock, $7 Par Value, 115,000 5,000 510,000 14,000 shares authorized and issued 98,000 Preferred Stock, $4 No-Par Value, 9,000 shares issued Income Tax Expense: Continuing 450,000 40,000 20,000 Operations 879,600 ncome Tax Expense: Income from Discontinued Operations 2,000

Explanation / Answer

Income Statement :-

Earning Per Shares of Common Stock (12000 shsres outstanding):-

Working Note 1:-

Net Income from Continuing Operation :-

= Income from continuing operations - (No. of preferred shares * Dividend per share)

= $69600 - (9000*$4)

= $69600 - $36000

= $33600

Earnings Per Share = $33600 / 12000

= $2.80

Working Note 2 :-

Earnings Per Share on Income from discontinued operations :-

= Net Income from discontinued operationd / No. of common stock

= $3000 / 12000 shares

= $0.25

Working Note 3 :-

Total Net Income = Net Income - (No. of Preferred shares * Dividend per share)

= $72600 - (9000*$4)

= $72600 - $36000

= $36600

Earnings Per Share = $36600 / 12000

= $3.05

Particulars Amount ($) Amount ($) Net Sales Revenue 879600 Less : Cost of Goods Sold (510000) Gross Profit 369600 Less : Operating Expenses: Selling Expenses 145000 Administrative Expenses 115000 (260000) Operating Income 109600 Other Revenues and (Expenses) 0 Income Before Taxes 109600 Less : Income Tax Expense (40000) Income from Continuing operations 69600 Add ; Discontinued Operations(Less Applicable tax $2000)($5000 - $2000) 3000 Net Income 72600

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