SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 4-1

STARR CO.
Income Statement
For the Year 2014
Revenues
Sales revenue .......................................................... $540,000

Expenses
Cost of goods sold ..................................................$330,000
Salaries and wages expense .................................. 120,000
Other operating expenses ...................................... 10,000
Income tax expense ................................................ 25,000
Total expenses................................................ 485,000

Net income ......................................................................... $ 55,000

Earnings per share ............................................................ $0.55*

*$55,000 ÷ 100,000 shares.

Note: The increase in value of the company reputation and the unrealized gain
on the value of patents are not reported.
BRIEF EXERCISE 4-2

BRISKY CORPORATION
Income Statement
For the Year Ended December 31, 2014
Revenues
Net sales ................................................................. $2,400,000
Interest revenue ...................................................... 31,000
Total revenues ................................................ 2,431,000

Expenses
Cost of goods sold .................................................
$1,450,000
Selling expenses ....................................................280,000
Administrative expenses .......................................212,000
Interest expense ..................................................... 45,000
Income tax expense* ..............................................133,200
Total expenses............................................... 2,120,200

Net income ........................................................................ $ 310,800

Earnings per share** ........................................................ $4.44

*($2,431,000 – $1,450,000 – $280,000 – $212,000 – $45,000) X 30% = $133,200.

**$310,800 ÷ 70,000 shares.

BRIEF EXERCISE 4-3

BRISKY CORPORATION
Income Statement
For the Year Ended December 31, 2014
Net sales ................................................................. $2,400,000
Cost of goods sold ................................................ 1,450,000
Gross profit .................................................. 950,000
Selling expenses .................................................... $280,000
Administrative expenses ....................................... 212,000 492,000
Income from operations ........................................ 458,000
Other revenue and gains
Interest revenue ........................................... 31,000
Other expenses and losses
Interest expense .......................................... 45,000 14,000
Income before income tax ..................................... 444,000
Income tax expense ............................................... 133,200
Net income ............................................................. $ 310,800

Earnings per share ................................................ $4.44*

*$310,800 ÷ 70,000 shares.

BRIEF EXERCISE 4-4

Income from continuing operations .......................... $10,600,000

Discontinued operations
Loss from operation of discontinued
restaurant division (net of tax)...................... $315,000
Loss from disposal of restaurant
division (net of tax) ........................................ 189,000 504,000
Net income .................................................................. $10,096,000
Earnings per share .....................................................
Income from continuing operations ................. $1.06
Discontinued operations, net of tax ................. (0.05)*
Net income ......................................................... $1.01
*Rounded
BRIEF EXERCISE 4-5

Income before income tax and extraordinary

item .......................................................................... $6,300,000
Income tax expense .................................................... 1,890,000
Income before extraordinary item ............................. 4,410,000
Extraordinary item—loss from casualty.................... $770,000
Less: Applicable income tax ............................. 231,000 539,000
Net income .................................................................. $3,871,000
Earnings per share
Income before extraordinary item .................... $0.88*
Extraordinary loss, net of tax ........................... (0.11)*
Net income ......................................................... $0.77
*Rounded

BRIEF EXERCISE 4-6

2014 2013 2012

Income before income tax $180,000 $145,000 $170,000
Income tax (30%) 54,000 43,500 51,000
Net Income $126,000 $101,500 $119,000

BRIEF EXERCISE 4-7

Vandross would not report any cumulative effect because a change in estimate is
not handled retrospectively. Vandross would report bad debt expense of
$120,000 in 2014.

BRIEF EXERCISE 4-8

$1,000,000 – $250,000 = $3.95 per share

190,000
BRIEF EXERCISE 4-9

PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1 ........................................... $ 675,000
Add: Net income .............................................................. 1,400,000
2,075,000
Less: Cash dividends ....................................................... 75,000
Retained earnings, December 31 ...................................... $2,000,000

BRIEF EXERCISE 4-10

PORTMAN CORPORATION
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1, as reported ........................ $ 675,000
Correction for overstatement of expenses in
prior period (net of tax) ............................................. 80,000
Retained earnings, January 1, as adjusted ........................ 755,000
Add: Net income ................................................................ 1,400,000
2,155,000
Less: Cash dividends ......................................................... 75,000
Retained earnings, December 31 ........................................ $2,080,000

BRIEF EXERCISE 4-11

(a) Net income (Dividend revenue) ............................. $3,000

(b) Net income .............................................................. $3,000
Unrealized holding gain (net of tax) ...................... 4,000
Comprehensive income ......................................... $7,000
(c) Unrealized holding gain (net of tax)
(Other comprehensive income) ............................. $4,000
(d) Accumulated other comprehensive income,
January 1, 2014 ................................................... $ 0
Unrealized holding gain (net of tax) ...................... 4,000
Accumulated other comprehensive income,
December 31, 2014.............................................. $4,000
 SOLUTIONS TO EXERCISES

EXERCISE 4-1 (18–20 minutes)

Computation of net income

Change in assets: $79,000 + $45,000 + $127,000 – $47,000 = $204,000 Increase
Change in liabilities: $ 82,000 – $51,000 = 31,000 Increase

Change in stockholders’ equity: $173,000 Increase

Change in stockholders’ equity accounted

for as follows:
Net increase $ 173,000
Increase in common stock $125,000
Increase in paid-in capital in excess
of par 13,000
Decrease in retained earnings due to
dividend declaration (19,000)
Net increase accounted for (119,000)
Increase in retained earnings due to net
income $ 54,000
EXERCISE 4-2 (10–15 minutes)

Sales revenue ......................................................................... $310,000

Cost of goods sold ................................................................ 140,000
Gross profit ............................................................................ 170,000
Selling administrative expenses ........................................... 50,000
120,000
Other revenues and gains
Gain on sale of plant assets......................................... 30,000
Income from operations ........................................................ 150,000(a)
Interest expense..................................................................... 6,000
Income from continuing operations ..................................... 144,000
Loss on discontinued operations ......................................... (12,000)
Net Income ............................................................................. 132,000(b)
Allocation to noncontrolling interest.................................... (40,000)
Net income attributable to controlling shareholders .......... $ 92,000(c)

Net income ............................................................................. $132,000

Unrealized gain on available-for-sale investments.............. 10,000
Comprehensive income......................................................... $142,000(d)

Net income ............................................................................. $132,000

Dividends................................................................................ (5,000)
12/31/14 Retained earnings .................................................. $127,000(e)
EXERCISE 4-3 (25–35 minutes)

(a) Total net revenue:

Sales revenue $390,000
Less: Sales discounts $ 7,800
Sales returns 12,400 20,200
Net sales 369,800
Dividend revenue 71,000
Rent revenue 6,500
Total net revenue $447,300

(b) Net income:

Total net revenue (from a) $447,300
Expenses:
Cost of goods sold 184,400
Selling expenses 99,400
Administrative expenses 82,500
Interest expense 12,700
Total expenses 379,000
Income before income tax 68,300
Income tax 31,000
Net income $ 37,300

(c) Dividends declared:

Ending retained earnings $134,000
Beginning retained earnings 114,400
Net increase 19,600
Less: Net income 37,300
Dividends declared $ 17,700
EXERCISE 4-3 (Continued)

ALTERNATE SOLUTION

Beginning retained earnings $114,400

Add: Net income 37,300
151,700
Less: Dividends declared ?
Ending retained earnings $134,000

Dividends declared must be $17,700

($151,700 – $134,000)

(d) Income attributed to controlling stockholders = (Net income –

Allocation to noncontrolling interest)
$37,300 - $ $17,000 = $ 20,300

EXERCISE 4-4 (20–25 minutes)

LEROI JONES INC.

Income Statement
For Year Ended December 31, 2014

Revenues
Net sales ($1,250,000(b) – $17,000) ......................... $1,233,000
Expenses
Cost of goods sold ................................................. 500,000
Selling expenses .................................................... 400,000(c)
Administrative expenses ....................................... 100,000(a)
Interest expense ..................................................... 20,000
Total expenses............................................... 1,020,000
Income before income tax ................................................ 213,000
Income tax .............................................................. 63,900
Net income ....................................................................... $ 149,100
Earnings per share ........................................................... $ 7.46*

*Rounded
EXERCISE 4-4 (Continued)

Determination of amounts

(a) Administrative expenses = 20% of cost of good sold

= 20% of $500,000
= $100,000

(b) Gross sales X 8% = administrative expenses

= $100,000 ÷ 8%
= $1,250,000

(c) Selling expenses = four times administrative expenses.

(operating expenses consist of selling
and administrative expenses; since
selling expenses are 4/5 of operating
expenses, selling expenses are 4
times administrative expenses.)
= 4 X $100,000
= $400,000

Earnings per share $7.46 ($149,100 ÷ 20,000)

Note: An alternative income statement format is to show income tax part of

expenses, and not as a separate item. In this case, total expenses are $1,083,900.
EXERCISE 4-5 (30–35 minutes)

(a) Multiple-Step Form

P. BRIDE COMPANY
Income Statement
For the Year Ended December 31, 2014
(In thousands, except earnings per share)

Sales revenue ..................................................... $96,500

Cost of goods sold ............................................ 60,570
Gross profit ........................................................ 35,930

Operating Expenses
Selling expenses
Sales commissions ................................ $7,980
Depr. of sales equipment....................... 6,480
Delivery expense .................................... 2,690 $17,150
Administrative expenses
Officers’ salaries .................................... 4,900
Depr. of office furn. and equip. ............. 3,960 8,860 26,010
Income from operations .................. 9,920

Other Revenues and Gains

Rent revenue ................................................ 17,230
27,150
Other Expenses and Losses
Interest expense........................................... 1,860

Income before income tax ................................. 25,290

Income tax .................................................... 9,070
Net income ......................................................... $16,220

Earnings per share ($16,220 ÷ 40,550).............. $.40

EXERCISE 4-5 (Continued)

(b) Single-Step Form

P. BRIDE COMPANY
Income Statement
For the Year Ended December 31, 2014
(In thousands, except earnings per share)

Revenues
Net sales ........................................................................... $ 96,500
Rental revenue ................................................................. 17,230
Total revenues ............................................................ 113,730

Expenses
Cost of goods sold........................................................... 60,570
Selling expenses .............................................................. 17,150
Administrative expenses ................................................. 8,860
Interest expense ............................................................... 1,860
Total expenses ........................................................... 88,440

Income before income tax ..................................................... 25,290

Income tax .............................................................................. 9,070
Net income........................................................................ $ 16,220

Earnings per share ................................................................ $.40

Note: An alternative income statement format for the single-step form is to show
income tax a part of expenses, and not as a separate item.

(c) Single-step:
1. Simplicity and conciseness.
2. Probably better understood by users.
3. Emphasis on total costs and expenses and net income.
4. Does not imply priority of one revenue or expense over another.
EXERCISE 4-5 (Continued)

Multiple-step:
1. Provides more information through segregation of operating and
nonoperating items.
2. Expenses are matched with related revenue.

Note to instructor: Students’ answers will vary due to the nature of the
question; i.e., it asks for an opinion. However, the discussion supporting the
answer should include the previous points.

EXERCISE 4-6 (30–35 minutes)

MARIA CONCHITA ALONZO CORP.

Income Statement
For the Year Ended December 31, 2014

Sales Revenue
Sales revenue ........................................................... $1,380,000
Less: Sales returns and allowances ....................... $150,000
Sales discounts ............................................. 45,000 195,000
Net sales ................................................................... 1,185,000
Cost of goods sold................................................... 621,000
Gross profit on sales ..................................................... 564,000

Operating Expenses
Selling expenses................................................... 194,000
Administrative and general expenses ................. 97,000 291,000
Income from operations ................................................ 273,000
EXERCISE 4-6 (Continued)

Other Revenues and Gains

Interest revenue ....................................................... 86,000
359,000
Other Expenses and Losses
Interest expense ....................................................... 60,000

Income before income tax and extraordinary item ........ 299,000

Income tax ($299,000 X .34) ..................................... 101,660
Income before extraordinary item .................................. 197,340
Extraordinary item—loss from earthquake damage .......... $150,000
Less: Applicable income tax reduction
($150,000 X .34) ........................................................... 51,000 99,000
Net income ....................................................................... $ 98,340

Per share of common stock:

Income before extraordinary item
($197,340 ÷ 100,000) ............................................... $1.97*
Extraordinary item (net of tax) .................................. (.99)
Net income ($98,340 ÷ 100,000) ................................. $ .98

*Rounded
EXERCISE 4-7 (30–40 minutes)

(a) Multiple-Step Form

LATIFA SHOE CO.
Income Statement
For the Year Ended December 31, 2014

Net sales ....................................................... $980,000

Cost of goods sold ...................................... 496,000
Gross profit on sales ................................... 484,000

Operating Expenses
Selling expenses
Salaries and Wages ......................... $114,800
Depr. exp. (70% X $65,000) .............. 45,500
Supplies ............................................ 17,600 $177,900
Administrative expenses
Wages and salaries .......................... 135,900
Other admin. expenses .................... 51,700
Depr. exp. (30% X $65,000) .............. 19,500 207,100 385,000
Income from operations .............................. 99,000

Other Revenues and Gains

Rent revenue .......................................... 29,000
128,000
Other Expenses and Losses
Interest expense..................................... 18,000

Income before income tax ........................... 110,000

Income tax .............................................. 37,400
Net income ................................................... $ 72,600

Earnings per share ($72,600 ÷ 20,000)........ $3.63

EXERCISE 4-7 (Continued)

(b) Single-Step Form

LATIFA SHOE CO.
Income Statement
For the Year Ended December 31, 2014

Revenues
Net sales ........................................................................ $ 980,000
Rent revenue ................................................................. 29,000
Total revenues ......................................................... 1,009,000

Expenses
Cost of goods sold........................................................ 496,000
Selling expenses ........................................................... 177,900
Administrative expenses .............................................. 207,100
Interest expense............................................................ 18,000
Total expenses ........................................................ 899,000

Income before income tax .................................................. 110,000

Income tax ..................................................................... 37,400
Net income .......................................................................... $ 72,600

Earnings per share ($72,600 ÷ 20,000)............................... $3.63

Note: An alternative income statement format for the single-step form is to show
income tax as part of expenses, and not as a separate item.

(c) Single-step:
1. Simplicity and conciseness.
2. Probably better understood by users.
3. Emphasis on total costs and expenses and net income.
4. Does not imply priority of one revenue or expense over another.
EXERCISE 4-7 (Continued)

Multiple-step:
1. Provides more information through segregation of operating and
nonoperating items.
2. Expenses are matched with related revenue.

Note to instructor: Students’ answers will vary due to the nature of the question,
i.e., it asks for an opinion. However, the discussion supporting the answer
should include the above points.

EXERCISE 4-8 (15–20 minutes)

(a) Net sales $ 540,000

Cost of goods sold (210,000)
Administrative expenses (100,000)
Selling expenses (80,000)
Discontinued operations-loss (40,000)
Income before income tax 110,000
Income tax ($110,000 X .30) 33,000
Net income $ 77,000

(b) Income from continuing operations before income tax $150,000*

Income tax ($150,000 X .30) 45,000
Income from continuing operations 105,000
Discontinued operations, less applicable income tax of
$12,000 (28,000)
Net income $ 77,000

*$110,000 + $40,000

Earnings per share:

Income from continuing operations ($105,000 ÷ 10,000) $10.50
Loss on discontinued operations, net of tax (2.80)
Net Income ($77,000 ÷ 10,000) $ 7.70
EXERCISE 4-9 (30–35 minutes)

(a) IVAN CALDERON CORP.

Income Statement
For the Year Ended December 31, 2014

Sales Revenue
Net sales ...................................................................... $1,300,000
Cost of goods sold...................................................... 780,000
Gross profit ...................................................... 520,000
Operating Expenses
Selling expenses ....................................................$65,000
Administrative expenses ....................................... 48,000 113,000
Income from operations ................................................... 407,000

Other Revenues and Gains

Dividend revenue ................................................... 20,000
Interest revenue ...................................................... 7,000 27,000
434,000
Other Expenses and Losses
Write-off of inventory due to obsolescence.............. 80,000
Income before income tax and extraordinary item ............. 354,000
Income tax .............................................................. 120,360
Income before extraordinary item ................................... 233,640
Extraordinary item
Casualty loss ................................................. 50,000
Less: Applicable income tax
($50,000  .34)............................................ 17,000 (33,000)
Net income ........................................................................ $ 200,640
Per share of common stock:
Income before extraordinary item
($233,640 ÷ 60,000).............................................. $3.89*
Extraordinary item, net of tax ................................ (.55)
Net income ($200,640 ÷ 60,000) ............................. $3.34
*Rounded
EXERCISE 4-9 (Continued)

(b) IVAN CALDERON CORP.

Retained Earnings Statement
For the Year Ended December 31, 2014

Retained earnings, Jan. 1, as reported.............................................. $ 980,000

Correction for overstatement of net income in prior period
(depreciation error) (net of $18,700 tax).................................. (36,300)
Retained earnings, Jan. 1, as adjusted ............................................. 943,700
Add: Net income ................................................................................. 200,640
1,144,340
Less: Dividends declared ................................................................... 45,000
Retained earnings, Dec. 31 ................................................................$1,099,340

EXERCISE 4-10 (20–25 minutes)

Computation of net income:

2014 net income after tax ............................................................ $33,000,000
2014 net income before tax
[$33,000,000 ÷ (1 – .34)]............................................................50,000,000
Add back major casualty loss .....................................................18,000,000
Income from operations ........................................................68,000,000
Income tax (34% X $68,000,000) ..................................................23,120,000
Income before extraordinary item...............................................44,880,000
Extraordinary item:
Casualty loss ..........................................................................
$18,000,000
Less: Applicable income tax reduction ...................................
6,120,000 (11,880,000)
Net income ...................................................................................
$33,000,000
EXERCISE 4-10 (Continued)

Net income .........................................................................................

$33,000,000
Less: Provision for preferred dividends
(8% of $4,500,000) .......................................................................... 360,000
Income available to common stockholders .....................................32,640,000
Common stock shares....................................................................... ÷10,000,000
Earnings per share ............................................................................ $3.26*

Income statement presentation

Per share of common stock:
Income before extraordinary item ......................................... $4.45a
Extraordinary item, net of tax ................................................ (1.19)b
Net income.............................................................................. $3.26

a b
$44,880,000 – $360,000 $11,880,000
= $4.45* = $1.19*
10,000,000 10,000,000

*Rounded
EXERCISE 4-11 (20–25 minutes)

SPOCK CORPORATION
Income Statement
For the Year Ended December 31, 2014

Net sales(a) ................................................................ $4,162,000

Cost of goods sold(b)................................................ 2,665,000
Gross profit ........................................................ 1,497,000
Selling expenses(c) ................................................... $636,000
Administrative expenses(d) ...................................... 491,000 1,127,000
Income from operations .................................... 370,000
Rent revenue ............................................................ 240,000
Interest expense....................................................... (176,000) 64,000
Income before income tax ....................................... 434,000
Income tax ($434,000 X .34) ............................... 147,560
Income before extraordinary item .......................... 286,440
Extraordinary loss ................................................... 70,000
Less: Applicable income tax ............................. 23,800 46,200
Net income ............................................................... $ 240,240

Earnings per share ($900,000 ÷ $10 par value = 90,000 shares)

Income before extraordinary item ($286,440 ÷ 90,000) ......... $3.18*
Extraordinary item, net of tax................................................. (.51)*
Net income .............................................................................. $2.67
*Rounded

Supporting computations

(a) Net sales:

$4,275,000 – $34,000 – $79,000 = $4,162,000
(b) Cost of goods sold:
$535,000 + ($2,786,000 + $72,000 – $27,000 – $15,000) – $686,000 = $2,665,000
(c) Selling expenses:
$284,000 + $83,000 + $69,000 + $54,000 + $93,000 + $36,000 + $17,000 =
$636,000
(d) Administrative expenses:
$346,000 + $33,000 + $24,000 + $48,000 + $32,000 + $8,000 = $491,000
EXERCISE 4-12 (20–25 minutes)

(a) EDDIE ZAMBRANO CORPORATION

Retained Earnings Statement
For the Year Ended December 31, 2014

Balance, January 1, as reported .............................................. $225,000*

Correction for depreciation error (net of $10,000 tax) ............ (15,000)
Cumulative decrease in income from change in
inventory methods (net of $14,000 tax)......................... (21,000)
Balance, January 1, as adjusted .............................................. 189,000
Add: Net income ....................................................................... 144,000**
333,000
Less: Dividends declared ......................................................... 100,000
Balance, December 31 .............................................................. $233,000

*($40,000 + $125,000 + $160,000) – ($50,000 + $50,000)

**[$240,000 – (40% X $240,000)]

(b) Total retained earnings would still be reported as $233,000. A restriction does
not affect total retained earnings; it merely labels part of the retained earnings
as being unavailable for dividend distribution. Retained earnings would be
reported as follows:

Retained earnings:
Appropriated $ 70,000
Unappropriated 163,000
Total $233,000
EXERCISE 4-13 (15–20 minutes)

Net income:
Income from continuing operations
before income tax ....................................................................$23,650,000
Income tax (35% X $23,650,000) ..................................................8,277,500
Income from continuing operations ........................................... 15,372,500
Discontinued operations
Loss before income tax .........................................................
$3,225,000
Less: Applicable income tax (35%) .......................................
1,128,750 (2,096,250)
Net income ...................................................................................
$13,276,250

Preferred dividends declared:...........................................................

$ 1,075,000

Weighted average common shares outstanding....................................4,000,000

Earnings per share

Income from continuing operations ........................................... $3.57*
Discontinued operations, net of tax ........................................... (.52)**
Net income ................................................................................... $3.05***

*($15,372,500 – $1,075,000) ÷ 4,000,000. (Rounded)

**$2,096,250 ÷ 4,000,000. (Rounded)
***($13,276,250 – $1,075,000) ÷ 4,000,000.
EXERCISE 4-14 (15–20 minutes)

(a) 2014
Income before income tax $450,000
Income tax (35%) 157,500
Net Income $292,500

(b) Cumulative effect for years prior to 2014.

Weighted- Tax Rate

Year Average FIFO Difference (35%) Net Effect
2012 $370,000 $395,000 $25,000
2013 390,000 430,000 40,000
Total $65,000 $22,750 $42,250

(c) 2014 2013 2012

Income before income tax $450,000 $430,000 $395,000
Income tax (35%) 157,500 150,500 138,250
Net income $292,500 $279,500 $256,750

EXERCISE 4-15 (15–20 minutes)

(a)

ROXANNE CARTER CORPORATION

Statement of Comprehensive Income
For the Year Ended December 31, 2014

Sales revenue ............................................................................ $1,200,000

Cost of goods sold ................................................................... 750,000
Gross profit ............................................................................... 450,000
Selling and administrative expenses....................................... 320,000
Net income ................................................................................ 130,000
Unrealized holding gain, net of tax .......................................... 18,000
Comprehensive income............................................................ $ 148,000
(b)

ROXANNE CARTER CORPORATION

Income Statement and Comprehensive Income Statement
For the Year Ended December 31, 2014

Sales .......................................................................................... $1,200,000

Cost of goods sold ................................................................... 750,000
Gross profit ............................................................................... 450,000
Selling and administrative expenses....................................... 320,000
Net income ................................................................................ $ 130,000
Comprehensive Income
Net income ................................................................................ $ 130,000
Unrealized holding gain............................................................ 18,000
Comprehensive income............................................................ $ 148,000

EXERCISE 4-16 (15–20 minutes)

C. REITHER CO.
Statement of Stockholders’ Equity
For the Year Ended December 31, 2014
Accumulated
Other
Retained Comprehensive Common
Total Earnings Income Stock

Beginning balance $520,000 $ 90,000 $80,000 $350,000

Comprehensive income
Net income* 120,000 120,000
Other comprehensive income
Unrealized holding loss (60,000) (60,000)
Comprehensive income
Dividends (10,000) (10,000)
Ending balance $570,000 $200,000 $20,000 $350,000

*($700,000 – $500,000 – $80,000).

EXERCISE 4-17 (30–35 minutes)
(a) ROLAND CARLSON INC.
Income Statement
For the Year Ended December 31, 2014

Revenues
Sales revenue .............................................................................. $1,900,000
Rent revenue ............................................................................... 40,000
Total revenues .................................................................. 1,940,000

Expenses
Cost of goods sold ........................................................... 850,000
Selling expenses .............................................................. 300,000
Administrative expenses ................................................. 240,000
Total expenses......................................................... 1,390,000
Income from continuing operations before
income tax .................................................................. 550,000
Income tax ............................................................. 187,000
Income from continuing operations ............................. 363,000
Discontinued operations
Loss on discontinued operations ........................ $75,000
Less: Applicable income tax reduction ............... 25,500 (49,500)
Income before extraordinary items .............................. 313,500
Extraordinary items:
Extraordinary gain ................................................ 95,000
Less: Applicable income tax ................................ 32,300 62,700
376,200
Extraordinary loss ................................................ 60,000
Less: Applicable income tax reduction ............... 20,400 (39,600)
Net income ..................................................................... $ 336,600

Per share of common stock:

Income from continuing operations ($363,000 ÷ 100,000)......... $3.63
Loss on discontinued operations, net of tax ......................... (.49)
Income before extraordinary items ($313,500 ÷ 100,000) .......... 3.14
Extraordinary gain, net of tax ................................................. .63
Extraordinary loss, net of tax .................................................. (.40)
Net income ($336,600 ÷ 100,000)............................................ $3.37
EXERCISE 4-17 (Continued)

(b) ROLAND CARLSON INC.

 Comprehensive Income Statement
For the Year Ended December 31, 2014

Net income ................................................................................. $336,600

Other comprehensive income
Unrealized holding gain, net of tax ..................................... 15,000
Comprehensive income............................................................. $351,600

(c) ROLAND CARLSON INC.

Retained Earnings Statement
For the Year Ended December 31, 2014

Retained earnings, January 1 .......................................................... $600,000

Add: Net income ............................................................................... 336,600
936,600
Less: Dividends declared ................................................................. 150,000
Retained earnings, December 31 ..................................................... $786,600