Presentation of the Income Statement Pelican Enterprises had the following account balances in its general ledger at June 30, 2004, the end of the company’s fiscal year. All adjusting entries except for the accrual of income taxes at 30%) had been entered. The company had an average of 900,000 shares of common stock outstanding during the year.
|
General ledger account balances (in thousands) |
|||
|
Accounts receivable |
$349 |
Land |
$1,980 |
|
Accumulated depreciation |
922 |
Loss on sale of old machinery |
255 |
|
Advertising expense |
1,224 |
Merchandise inventory |
471 |
|
Buildings and equipment |
4,811 |
Notes payable, long term |
150 |
|
Cash |
482 |
Preferred stock, 7% |
300 |
|
Common stock |
2,400 |
Prepaid advertising |
54 |
|
Cost of goods sold |
3,660 |
Rent expense |
546 |
|
Depreciation expense |
102 |
Rent payable |
450 |
|
Extraordinary gain on extinguishment of debt |
40 |
Retained earnings |
513 |
|
Sales revenue |
6,930 |
||
|
Investments, long term |
250 |
Service revenue |
3,382 |
|
Interest revenue |
44 |
Wages expense |
855 |
|
Interest expense |
124 |
Wages payable |
32 |
Required
A. Prepare an income statement in good form, including earnings per share information.
B. Have the closing entries been made to the accounting system? How can you tell? (Hint: You might want to review the accounting cycle in Chapter F3.)
C. What is the amount of net income available to common stockholders? Why is this important information?
D. Why do you think that GAAP require that gross profit, operating income, pretax income, and net income be separately disclosed?