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E4-8 (Multiple-Step Statement with Retained Earnings) Presented below is information related to Brokaw Corp. for the year 2012.
Net sales $1,200,000
Cost of goods sold $780,000
Selling expenses $65,000
Administrative expenses $48,000
Dividend revenue $20,000
Interest revenue $7,000
Write-off of inventory due to obsolescence $80,000
Depreciation expense omitted by accident in 2011 $40,000
Casualty loss (extraordinary item) before taxes $50,000
Cash dividends declared $45,000
Retained earnings at December 31, 2011 $980,000
Effective tax rate of 34% on all items
 
Instructions
  a. Prepare a multiple-step income statement for 2012. Assume that 60,000 shares of common stock are outstanding.
  b. Prepare a retained earnings statement for 2012.
A BROKAW CORP. |
Income Statement |
For the Year Ended December 31, 2012 |
Sales Revenue | | |
      Net sales | | $1,200,000 |
      Cost of goods sold | |     780,000 |
                Gross profit | |     420,000 |
| | |
Operating Expenses | | |
Selling expenses | $65,000 | |
Administrative expenses |   48,000 |     113,000 |
Income from operations | | 307,000 |
| | |
Other Revenues and Gains | | |
Dividend revenue | 20,000 | |
Interest revenue |     7,000 |       27,000 |
| | 334,000 |
Other Expenses and Losses | | |
Write-off of inventory due to
  obsolescence | |       80,000 |
Income before income tax and extraordinary
  item | | 254,000 |
Income tax | |       86,360 |
Income before extraordinary item | | 167,640 |
Extraordinary item | | |
Casualty loss | 50,000 | |
Less:   Applicable tax reduction |   17,000 |       33,000 |
Net income | | $   134,640 |
Per share of common stock: | | |
Income before...

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