Reference no: EM132483015
Kelsy Company
Following are financial data for Kelsy Company for the year ended December 31, 2018.
Revenues and expenses:
Continuing operations:
Net sales revenue................................................................................. $1,950,000
Cost of goods sold.................................................................................... 510,000
Selling & administrative expenses........................................................... 200,000
Interest income........................................................................................... 10,000
Interest expense.......................................................................................... 50,000
Discontinued operations-Division X (Note A):
Net sales revenue...................................................................................... 800,000
Cost of goods sold.................................................................................... 700,000
Selling & administrative expenses........................................................... 500,000
Other:
Discontinued division phase-out loss (Note A)....................................... 250,000
Litigation loss (Note B)............................................................................ 100,000
Dividends declared (Note C).................................................................... 220,000
Note A. Division X was phased out in September. Phase-out losses, including severance pay, amounted to $250,000.
Note B. In 2018 the company paid $100,000 to a former employee in an out-of-court settlement of litigation stemming from an alleged employment rights violation. The alleged incident occurred in 2015 and no losses were accrued heretofore with respect to this case.
Note C. On December 20 the Company declared cash dividends of $220,000 payable on January 20, 2019.
Income taxes. All amounts stated above are before considering the effects of income taxes. The income tax rate (state + federal) is 40%.
Required:
Question 1: Prepare Kelsy's income statement for 2018. Omit EPS data.
Check Figures:
Operating income = 1,240,000
Income from continuing operations = 660,000
Loss from operations, net of tax benefit = 240,000
Net income = 270,000