Explanation Retained earnings : Retained earnings are that portion of profits which are earned by a company but not distributed to stockholders in the form of dividends. These earnings are retained for various purposes like expansion activities, or funding any future plans. Prepare multiple –step income statement for the Company M and also provide its necessary notes. Company M Income statement for the years ended December 31, 2016 Particulars Amount in $ Sales 206,000 Cost of goods sold (131,000) Gross profit 75,000 Operating expenses (19,250) Pretax income from continued operations 55,750 Income tax expense (30%) (16,725) Income from continued operations 39,025 Results of discontinued operations: Gain on disposal of discounted operations (net of $2,400 income tax) 5,600 Loss from discounted operations (net of $2,700 income tax credit) (14,000) Net income 30,625 Basic earnings per share: Income from continuing operations 2.85 Results from discontinued operations (0.70) Extraordinary gain 0.88 Net income 2.15 (Table 1) Notes to the financial statement: Note A: Preferred dividend of $4,800 is deducted from the income from operations and net income to ascertain the earnings available in the common stock. The resulting amount of $34,225 (income from operations) and $28,825(net income) is divided with weighted average number of shares outstanding that yields $2.85 and $2.15 respectively. Working note (1): Calculate the number of common shares outstanding for the year 2016. Number of common shares outstanding } = ( Number of common shares − Shares issued on July − Shares issued on November ) = 18 , 000 − 2 , 000 − 6 , 000 = 10 , 000 Working note (2): Calculate the weighted average shares outstanding for the year 2016

Intermediate Accounting: Reporting and Analysis

2nd Edition

ISBN: 9781285453828

Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher: Cengage Learning

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Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading struc…

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Chapter 16, Problem 18P

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Prepare multiple–step income statement for the Company M and also provide its necessary notes.

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Chapter 16, Problem 17P

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Intermediate Accounting: Reporting and Analysis

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Prepare multiple–step income statement for the Company M and also provide its necessary notes.

Solution Summary: The author explains how a preferred dividend of 4,800 is deducted from income from operations and net income to ascertain the earnings available in the common stock.

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Prepare multiple–step income statement for the Company M and also provide its necessary notes.

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Chapter 16 Solutions