The income statement below was prepared by a new and inexperienced employee in the accounting department of Dexter, Inc., a business organized as a corporation:

Instructions

a. Prepare a corrected income statement for the year ended December 31, 2015, using the format illustrated in Exhibit 12–2 . Include at the bottom of your income statement all appropriate earnings per share figures. Assume that throughout the year the company had outstanding a weighted average of 500,000 shares of a single class of capital stock.

b. Prepare a statement of retained earnings for 2015. (As originally reported, retained earnings at December 31, 2014, amount to $3,200,000.)

c. What does the $56,000 “Gain on sale of treasury stock” represent? How would you report this item in Dexter’s financial statements at December 31, 2015?

Transcribed Image Text:

DEXTER, INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2015 $10,200,000 Net sales Gain on sale of treasury stock.... 56,000 Excess of issuance price over par value of capital stock ... 710,000 Prior period adjustment (net of income tax) 80,000 110,000 $11,156,000 Extraordinary gain (net of income tax) .. Total revenue Less: $4,000,000 Cost of goods sold Selling expenses General and administrative expenses 1,050,000 840,000 Loss from settlement of litigation 10,000 Income tax on continuing operations 612,000 Operating loss on discontinued operations (net of income tax benefit) . 180,000 Loss on disposal of discontinued operations (net of income tax benefit) 240,000 Dividends declared on common stock 300,000 Total costs and expenses. 7,232,000 $ 3,924,000 Net income