11. (5 points) Information (in dollars) related to L Service Company for 2016 follows.

11. (5 points) Information (in dollars) related to L Service Company for 2016 follows.

Sales revenues 12,350,000

Cost of services provided 5,000,000

Selling, general, and administrative expenses 2,670,000

Investment income 187,000

Gain on the disposalof the tax preparation division* 825,000

Operating income of the tax preparation division up until its disposal* 922,000

Interest expense 147,000

Miscellaneous expenses 84,000

*The tax preparation division was considered a component.

Prepare an income statement in good form for the year 2016. Assume a 32% tax rate and that 140,000 shares of common stock were outstanding during all of 2016.

Expert Answer

 

L SERVICE COMPANY
Income Statement
For Year Ended December 31, 2016
Revenues & Gains:
Sales(net) $        12,350,000
Investment Income $              187,000
$        12,537,000
Expenses & Lossess:
Cost of services provided $          5,000,000
Selling, general, and administrative expenses $          2,670,000
Interest Expense $              147,000
Miscellaneous Expense $                84,000
$          7,901,000
Income from continuing operations before tax $          4,636,000
Less: Tax at 32% $          1,483,520
Income from continuing operations $          3,152,480
Gain on the disposal of the tax preparation division(net of tax) $              561,000
Operating income of the tax preparation division up until its disposal(net of tax) $              626,960
Income from discontinuing operations $          1,187,960
Net Income $          4,340,440
Earning per share
Income from continuing operations                       22.52
Income from discontinuing operations                         8.49
Net Income                       31.00
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