Chapter 5, Problem 17E

Income Statement and Retained Earnings Huff Company presents the following items derived from its December 31, 2019, adjusted trial balance:

The following information is also available for 2019 and is not reflected in the preceding accounts:

1. 1. The common stock has been outstanding all year. A cash dividend of $1.28 per share was declared and paid.
2. 2. Land was sold at a pretax gain of $6,300.
3. 3. Division X (a major component of the company) was sold at a pretax gain of $4,700. It had incurred a $9,500 pretax operating loss during 2019.
4. 4. A tornado, which is an unusual event in the area, caused a $5,400 pretax loss.
5. 5. The income tax rate on all items of income is 30%.
6. 6. The average shareholders’ equity is $90,000.

Required:

1. 1. Prepare a 2019 multiple-step income statement for Huff.
2. 2. Prepare a 2019 retained earnings statement.
3. 3. Compute the 2019 return on common equity (Net Income 4 Average Shareholders’ Equity).