Reference no: EM132880432

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

Sales (net) $124,000 Operating expenses $30,400

Interest expense 3,700 Common stock, $5 par 22,000

Cost of goods sold 66,200 Retained earnings, 1/1/2019 45,800

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

1. The common stock has been outstanding all year. A cash dividend of $1.28 per share was declared and paid.

2. Land was sold at a pretax gain of $6,300.

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. A tornado, which is an unusual event in the area, caused a $5,400 pretax loss.

5. The income tax rate on all items of income is 30%.

6. The average shareholders' equity is $90,000.

Required -

1. Prepare a 2019 multiple-step income statement for Huff.

2. Prepare a 2019 retained earnings statement.

3. Compute the 2019 return on common equity (Net Income 4 Average Shareholders' Equity).