The following incorrect income statement was prepared by the accountant of the Axel Corporation: AXEL CORPORATI0N Income statement For the Year Ended December 31, 2021 Revenues and gains: $790,000 Sales revenue 52,000 Interest revenue 99,000 Total revenues and gains 941,000 Expenses and losses: Cost of goods sold $425,000 Selling expense 79,000 Administrative expense 99,000 Interest expense 36,000 Restructuring costs 75,000 Income tax expense 56,750 Total expenses and losses 770,750 Net income $170,250 Earnings per share $ 1.70 Required: Prepare a multiple-step income statement for 2021 applying generally accepted accounting principles. The income tax rate is 25%. (Amounts to be deducted should be indicated with a minus sign. Round EPS answer to 2 decimal places.) AXEL CORPORATION Income Statement For the Year Ended December 31, 2021 _____________________________________ ______________ _____________________________________ ______________ Gross profit Operating expenses: _____________________________________ _______________ _____________________________________ _______________ _____________________________________ _______________ _____________________________________ _______________ _____________________________________ _______________ Total operating expenses ______________ Operating income Other income (expense): _____________________________________ ________________ _____________________________________ ________________ _____________________________________ ________________ _____________________________________ ________________ Total other income, net _______________ Income before income taxes _____________________________________ _______________ Net income _______________ Earnings per Share ______________
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
The following incorrect income statement was prepared by the accountant of the Axel Corporation:
AXEL CORPORATI0N
Income statement
For the Year Ended December 31, 2021
Revenues and gains: $790,000
Sales revenue 52,000
Interest revenue 99,000
Total revenues and gains 941,000
Expenses and losses:
Cost of goods sold $425,000
Selling expense 79,000
Administrative expense 99,000
Interest expense 36,000
Restructuring costs 75,000
Income tax expense 56,750
Total expenses and losses 770,750
Net income $170,250
Earnings per share $ 1.70
Required:
Prepare a multiple-step income statement for 2021 applying generally accepted accounting principles. The income tax rate is 25%. (Amounts to be deducted should be indicated with a minus sign. Round EPS answer to 2 decimal places.)
AXEL CORPORATION
Income Statement
For the Year Ended December 31, 2021
_____________________________________ ______________
_____________________________________ ______________
Gross profit
Operating expenses:
_____________________________________ _______________
_____________________________________ _______________
_____________________________________ _______________
_____________________________________ _______________
_____________________________________ _______________
Total operating expenses ______________
Operating income
Other income (expense):
_____________________________________ ________________
_____________________________________ ________________
_____________________________________ ________________
_____________________________________ ________________
Total other income, net _______________
Income before income taxes
_____________________________________ _______________
Net income _______________
Earnings per Share ______________
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