Assignment:
The RHS Co. reported the following items on its income statement for 2007.
a. Net operating revenues, $956,000
b. Cost of goods sold, $312.000
c. Selling and administrative expenses, $245,000
d. Research and development expenses, $122,000
e. Net interest expense, $8500
f. Provision for income taxes, $85,920
g. Current year loss from discontinued operations of $24,000, net of tax benefit of $7680
h. Loss from sale of discontinued operations of $89,000, net of tax benefit of $24,480
i. Preferred stock dividends, $48,000
The company had 25,000 shares of common stock outstanding throughout the fiscal year.
Compute each of the following:
A. Operating income
B. Income (loss) from continuing operations, before taxes
C. Income (loss) before discontinued operations
D. Net income (loss)
E. net income (loss) available for common shareholders
F. Earnings per share from continuing operations
G. Earnings per share from discontinued operations.
H. Earnings per share from net income (loss)
Explain whether each of the following would be expensed on the income statement in 2007 or in some later year, and why.
a. Inventory purchased in 2007 but sold in 2008
b. Estimated warranty costs for goods sold in 2007: the warranty servicing will take place in 2008 and 2009.
c. Bad debts caused by 2007 sales; actual bad receivables will not be identified until a later year.
d. Research and development costs incurred in 2007 but aimed at producing a better product in later years.