Question

Presented below is information related to Novak Company at December 31, 2020, the end of its first year of operations.

Sales revenue $291,980
Cost of goods sold 128,220
Selling and administrative expenses 51,800
Gain on sale of plant assets 27,190
Unrealized gain on available-for-sale debt investments 10,240
Interest expense 5,700
Loss on discontinued operations 12,550
Dividends declared and paid 4,600
Compute the following:
A) Income from operations.
B) Net income.
C) Comprehensive income.
D) Retained earnings balance at December 31, 2017.

Answer 1

Answer and Explanation:

The computation is shown below:

(a) Income from Operation is

= Sales Revenue - COGS - Selling & admin exp

= $291,980 - $128,220 - $51,800

= $111,960

(b) Net Income is

= Sales Revenue - COGS - Selling & admin exp + Gain on sales of assets - Interest exp - Loss on Discontinued Operations

= $291,980 - $128,220 - $51,800 + $27,190 - $5,700 - $12,550

= $120,900

(c) Comprehensive Income is

= Net Income + Unrealized gain on available for sale investments

= $120,900 + $10,240

= $131,140

(d) Retained earning ending balance is

= Net Income - Dividends declare & paid

= $120,900 - $4,600

= $116,300