P 11 -56B (L earn i ng Obj ec tiv es 1 , 4: P re p are a co mp le x i nco m e s t a t e m en t , i n
P11-56B (Learning Objectives 1, 4: Prepare a complex income statement, including earnings per share; evaluate quality of earnings) The following information was taken from the records of Shaw Cosmetics, Inc., at December 31, 2012:
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Prior-period adjustment—
Dividends on common stock …………..
$26,000
debit to Retained Earnings………….
$ 9,000
Interest expense…………………………….
25,000
Income tax expense (saving):
Gain on lawsuit settlement ……………..
10,000
Continuing operations ……………….
25,950
Dividend revenue ………………………….
16,000
Income from discontinued
Treasury stock, common
operations………………………………..
8,000
(5,000 shares at cost) …………….
15,000
Extraordinary loss …………………….
(13,500)
General expenses…………………………..
81,000
Loss on sale of plant assets………………….
15,000
Sales revenue ………………………………..
570,000
Income from discontinued
Retained earnings, beginning,
operations………………………………..
20,000
as originally reported …………….
197,000
Preferred stock, 6%, $30 par,
Selling expenses…………………………….
93,000
1,000 shares issued ……………………
30,000
Common stock, no par,
Extraordinary loss……………………………..
34,000
30,000 shares authorized
Cost of goods sold……………………………..
316,000
and issued ……………………………
390,000
▶ Requirements
1. Prepare Shaw Cosmetics’ single-step income statement, which lists all revenues together and all expenses together, for the fiscal year ended December 31, 2012. Include earnings-per-share data.
2. Evaluate income for the year ended December 31, 2012. Shaw’s top managers hoped to earn income from continuing operations equal to 11% of sales.
