Question

Starr Co. had sales revenue of $540,000 in 2014. Other items recorded during the year were:
Cost of goods sold $330,000
Salaries and wages expense 120,000
Income tax expense 25,000
Increase in value of company reputation 15,000
Other operating expenses 10,000
Unrealized gain on value of patents 20,000
Prepare a single-step income statement for Starr for 2014. Starr has 100,000 shares of stock outstanding. (Round earnings per share to 2 decimal places, e.g. 1.48.)

Answer 1

Answer:

Star Co.'s Net Income for the year ended 2014 is $55,000 and Earnings per Share are $0.55 per share.

Explanation:

                                                    Starr Co.  

                         Income Statement For the Year Ended 2014  

 

Revenues:  

Sales Revenue                                      $540,000  

 

Less Expenses:  

Cost of goods sold                              $330,000  

Salaries and Wages Expense              $120,000  

Income Tax Expense                              $25,000  

Other Operating Expense                      $10,000  

Total expenses                                       $485,000  

 

Net income                                               $55,000  

(Net Income = Total Revenues - Total Expenses)

Earnings per share (EPS)                           $ 0.55

(EPS = Net Income ÷ Number of Shares Outstanding)

(EPS = $55,000 ÷ 100,000 = $ 0.55 per share)

**Please note that the following items are not reported on the Income Statement:

• Increase in Value of Company Reputation
• Unrealized gain on value of patents